
\\\si 

Book i_^ 



— 



JAN '339 1900 



Our Industrial Revolution 



Tisrso. 

^PETITION? 



BOTH SIDES OF THE GREAT QUESTION 
IN BUSINESS, LAWAND POLITICS 



NETTLETON 



TO WHOM IT MAY CONCERN. 



Candor requires this ward, although it has little importance, ex- 
cept to the writer: I entered upon a study of the trust system, de- 
sirous only of ascertaining what were the facts, what the literature 
of the question revealed and what were the strongest respectable 
reasons that could be advanced for and against the proposed indus- 
trial revolution. Previous casual examination had inclined me to 
the opinion set forth in Chapter I, namely, that the new movement 
was legitimate, beneficial and permanent, requiring only regulation, 
and guidance to safeguard the public welfare. So far as I Lad any 
material interest in the subject it led in the same direction. My 
investigation extended through the greater part of a year. Wher- 
ever possible (and I had some special facilities) I went to original 
sources for information, both at home and abroad. The results of 
my search were subjected to as candid and thorough consideration 
as I was able to give to one of the most absorbing economic and 
ethical problems ever confronted by mankind. My sincere and un- 
qualified conclusions are substantially summarized in the leading , 
propositions set forth in "The Argument Against the Trust,*' in Chap- 
ter II, and in the latter part of Chapter V, entitled "Concerning Rem- 
edies." In a word, 1 have emerged from my study of the monopoly- 
trust movement profoundly convinced (1) that it is fundamentally 
wrong in theory and incurably evil in operation; (2) that, in the 
luminous words of President Hadley of Yale, it is a system which 
"makes increased economy in production a pretext for monopolizing 
the market;" (3) that its claimed advantages, so far as they are legit- 
imate, are equally attained by corporations and concerns engaged 
in modern large-scale production with adequate capital, without any- 
resort to monopoly; (4) that the trust system forcibly adds to natural 
industrial development, which all approve, the alien element of arbi- 
trary monopoly, which none should tolerate; (5) that (unless it is to 
serve as a stepping-stone to socialism) the trust system will endure 
only until the people give to their highest courts an opportunity to 
apply the law, not to its regulation, which would be futile, but to 
its removal, whielris entirely practicable. For this radical reversal 
of opinion on a great and pressing question, I offer no word of apology* 

A. B. NETTLETON. 




SIZE OF THE TRUST PROBLEM. 



The 130 principal trusts and consolidations in the United States, each 
capitalized at $10,000,000 or more, named herein (see Chapter XI), represent an 
aggregate capital in stock and bonds, as follows: 

Common Stock $2,784,218,000 

Preferred Stock 1,141,643,000 

Boads 88,288,000 

$4,014,149,000 

Estimated combined capital (stock and bonds) of general 
corporate trusts in the United States of less than 
$10,000,000 each 600,000,000 

Estimated capital (stock and bonds) of local corporate 
trusts in the United States, each having a virtual 
monopoly in its own field, not including tramway or 
transportation companies, syndicates, "combines" or 
other trade agreements 385,851,000 

Approximate grand total $5,000,000,000 



SUMMARY OF CONTENTS. 



Our Industrial Revolution— Is It a Substitution of Mo- 
nopoly for Competition? — The Case St'ated — The Argument for the 
Trust — The Argument Against — The Origin and Development of 
Trusts — Manner of Formation — Nature, Working and Effect — 
Uses and Abuses — Are They Permanent or Transient? — Their 
Relation to the Workingman, to the Farmer, to General Business 
and the Public Welfare— Effect on the Smaller Cities and 
Towns — Effect on Prices of Commodities — Is "Competition the 
L Je of Trade?" — Ethics and Economics of the Subject — Expert 
Opinions, Favorable and Unfavorable— Monopolies, Old and 
New — Concerning the Struggle for Existence and Survival of the 
Fittest — List of All Principal Industrial Trusts in the United 
States, with Names, Capital, Scope, etc. — Organized Labor and 
Organized Capital— Synopses of All State and Federal Anti-Trust 
Laws — Leading Court Decisions — The Trust in Politics — The 
Tariff and Trusts — Does the Trust System Shut the Door of Oppor- 
tunity for Young Men? — Trust Remedies — Shall Trusts be Regulated 
or Suppressed? — Is a Trust a Natural Evolution or Caused by 
Monopoly -Hunger? — The Trusts and Traveling Men — Banks and 
the Trusts — Attitude of Press and Pulpit— Does the Trust System 
Lead to Socialism? — A Chapter of Possible History (A. D. 1925) — 
The Colleges and the Trusts: Statements of Views by Professors 
of Political Economy at Leading Colleges and Universities — A 
Sketch and Defense of the Standard Oil Trust — Editorial Com- 
ment Thereon — Do Trusts Prevail in Europe? — The Law and the 
Trusts — Are Trusts Legally Invulnerable? — Strong Affirmative 
Argument by an Eminent Lawyer — Attitude of American Courts 
Toward Monopoly — Principal Addresses at National Non-Partisan 
Conference on Trusts, September, 1899 — Views of Hon. William J. 
Bryan — Recommendations Affecting Trusts by Presidents Har- 
rison, Cleveland and McKinley — The Question of Department 
Stores. 



TRUSTS or 
COMPETITION? 



Both Sides of the Great Question in 
Business, Law and Politics. 



EDITED BY 

A. B. NETTLETON, A. M., 

Former Assistant Secretary of the Treasury. 



PUBLISHERS: 

THE LEON PUBLISHING COMPANY. 

CHICAGO, 1900 



SECOND COPY, 

51982 

INTRODUCTORY NOTE. 



Editorial Rooms, American Monthly Review of Reviews, 

New York7 December 22, 1899. 
My Dear General Nettleton: 

I am more than ever impressed, after attending the Chicago Confer- 
ence on Trusts and Combinations, with the thought that what We need 
most of all at the present stage of the discussion is enlightenment. Great 
advances have been made of late in medical science by reason of a wholly 
new care and skill in diagnosis. Firing heavy artillery into the tree-tops 
is not the best way to kill squirrels, nor is bird-shot at short-range 
effective against modern fortifications. In medicine, in hunting, and in 
war, men adapt means to ends. It should also be true in statesmanship 
that when men endeavor to rid the body politic of an ailment, they should 
understand the history and nature of the disease. 

We have entered upon a new period in the history of the business 
world, that seems, to have grown logically, if not inevitably, out of a 
century of invention and organization which has enormously multiplied 
the volume of productive capital. The situation involves changes so 
sharp and so varied as to cause practical loss and hardship to tens of 
thousands, and serious apprehension to others by the hundreds of thou- 
sands. It is a situation that concerns everybody, and that unquestionably 
calls for a certain amount of governmental action. But before such action 
can be taken wisely or conclusively a great deal must be known, both 
as to principles and as to facts. 

We are beginning to create a body of literature on the subject of trusts 
and combinations of capital that will be very useful in the preliminary 
work of education. I -am glad to know that you are editing a book on 
this timely subject; and with my knowledge of your exceptional qualifi- 
cations for obtaining and presenting the mature views of the best thinkers 
on all phases of the questions at stake, I am confident that the book will 
be not only welcome, but widely usefil. 

Sincerely yours, 



ALBERT SHAW. 



COPIES RECE1VEJD, 



Copyright by 
A. B. NETTLETON, 

K-ibrtry ©F Congress, 1899. 



Office of the 



jaw p cy tpnn ^H> O ^ ^V» 

■tgltter of Copyright* C^ ^tp % \ \ , ^ ^ 



PREFACE. 



Since the civil war no question has so profoundly stirred the 
thought and interest of the American people as the now upper- 
most one of the Industrial Trust. With four-fifths of the great 
manufacturing industries of the country practically consolidated, 
each under a single ownership, and with competition in those in- 
dustries largely eliminated, the well-nigh universal apprehension 
and discussion are justified. Two squarely opposite opinions are 
held concerning the trust movement. One regards it as a nat- 
ural and probably inevitable outgrowth of modern economic con- 
ditions, and, therefore, to be welcomed and utilized as previous 
generations accepted, adjusted themselves to, and profited by, 
modern machinery and the factory system. The other holds it 
to be an artificial development, an economic impertinence, a 
forced substitution of private monopoly for open competition, 
rendered possible by special causes and constituting a dangerous 
assault upon the public welfare. One side contends that at most 
the trust system should be guided and regulated by law, to 
prevent possible a,buses and assure the greatest advantage from 
its advent. The other side as stoutly contends that inasmuch as 
private monopoly is always and everywhere a public enemy, and 
effective competition a necessary safeguard of the people, pal- 
liatives are either out of place or of only transient importance, 
while complete suppression of the trust through a prompt return 
to a competitive system, is the only adequate remedy. 

The literature of the trust question has been mainly of a fugi- 
tive character, scattered through a wilderness of periodicals and 
special pamphlets, and hence inaccessible to all except the 
few who have had both the patience and the opportunity for 

7 



8 PBEFACE. 

research. Current debate in the public press' and from the 
platform is necessarily disconnected and usually presents one 
side to the exclusion or distortion of the other. The modest aim 
of the writer has been, first, to gather from all sources and 
then present in compact form a sufficient body of authentic in- 
formation regarding all aspects of the trust problem to furnish 
the basis for intelligent opinions and conclusions, and, second, 
to supply opportunely a public ' forum where each side in a 
great debate may be heard at its best and usually in the words 
of its ablest exponents and advocates. 

There was a choice of two ways for presenting a summary 
of the argument on either side. One would have taken the usual 
form of a colorless and balanced memorandum, satisfactory per- 
haps to students, but dry and ill-adapted to the general public, for 
whom the book is specially designed. By the other method, 
which has been employed, the editor has endeavored to present 
for each side, with something of the realism of actual debate, the 
strongest summarized argument that can be honestly framed out 
of the material furnished by all who have publicly contributed 
anything of value to the discussion or to the literature of the 
subject— leaving each reader to draw his own conclusions. In 
other words, while the book is non-partisan, these arguments are 
fairly bi-partisan. This method also gave opportunity for put- 
ting a mass of unclaimed but valuable material through the 
editorial crucible and bringing it out in something like sym- • 
metrical shape. If it shall seem that the argument against the 
trust is somewhat more strenuous in style than the argument 
for the trust, it will be borne in mind that the former speaks 
for a multitude who feel that by the trust system they are 
wronged, ethically as well as economically— that it is not merely 
a matter of dollars and cents but of fair-play and manhood. 

Chicago, January, 1900. 



OUR ECONOMIC REVOLUTION. 



We are in the midst of a sweeping change which 
may fitly be termed an Economic Revolution. It sharply 
affects the welfare of every man, woman and child in the 
Republic and promises to have an even greater influence 
on coming generations than on ourselves, for its effects 
are likely to be progressive and cumulative. We of the 
present can neither feel nor see the results in their en- 
tirety. The change is fundamental, not superficial nor 
incidental. It involves not simply the adoption of novel 
business methods, but the substitution of a new eco- 
nomic principle in place of that which has regulated 
trade, industry and nearly every form of human en- 
deavor, since history began. The novelty, , suddenness 
and magnitude of this movement do not necessarily 
argue for or against its desirability, but they do chal- 
lenge and j^ompel the most prompt and thorough 
scrutiny. 

Since thebeginnings of civilization, and with steadily 
increasing urgency, competition in business has been 
a necessity, wholesome though irksome, confronting and 
environing everyone engaged in the struggle for existence. 
Naturally in the early history of a race and in new or 
pioneer communities, competition along most lines is at 
its minimum, because under such conditions wants are 
few and natural resources and opportunities abundant 
in proportion to the sparse population. But even at the 
dawn of history Abram and Lot with their somewhat 
pugnacious herdsmen found the grass supply insuffi- 
cient for their respective flocks and herds on the slopes 

9 



10 TRUSTS OR COMPETITION? 

of Canaan, so that "the land was not able to bear them 
that they might dwell together." Their compromise 
agreement to separate and thereafter supply beef and 
mutton to wholly different communities, instead of wag- 
ing a mutually destructive competitive warfare, was 
sound political economy as well as good neighborhood. 

The time is not very long past when kings' favorites 
were often exempted from the operation of this law of 
life through royal grants, called monopolies, conferring 
the exclusive right to carry on a given business in the 
community. These special privileges did not stand for 
any economic principle. They did not constitute even 
an attempt to solve any problem or to promote the com- 
mon welfare. They simply represented, in the passing 
childhood of the race, the weakness of a monarch yield- 
ing to the greed and importunity of a courtier. They 
rendered the general burden heavier by so much as the 
favored few were relieved. Then followed swarms of 
private monopolies for all conceivable purposes, sold by 
the crown or the state at auction or otherwise, to in- 
dividuals or companies as a means of raising needed 
revenue. This policy was at times carried so far that 
monopolies became the rule and open competition the ex- 
ception. In 1623 the Monopolies Act was passed by the 
English Parliament, abrogating all such grants and per- 
manently fixing the attitude of the nation and of the 
English-speaking race as anti-monopolistic. Much of the 
odium then attaching to the term monopoly has adhered 
to it down to the present day. Both in the popular mind 
and in the eye of the law it represented and still repre- 
sents the negation of economic fair play. 

For a long period this reaction against special trade 
privileges undoubtedly hampered and retarded indus- 
trial and commercial progress by prohibiting all forms 
-of business association which could even theoretically 
restrain competition and thus threaten a return or ap- 
proach to monopoly. Both the courts and the people 



OUR ECONOMIC REVOLUTION. 11 

were morbidly jealous of the inevitable tendency toward 
such association of capital and effort, and the common 
law, largely built up out of the judicial decisions of the 
time, reflected and to some extent or in some sections 
still reflects, this over-conservative spirit. It is only 
during the last half of the nineteenth century both in 
England and the United States that the old bondage 
has been thrown off and almost entire freedom of busi- 
ness association established. To-day in both countries, 
and the same is largely true of Continental Europe, any 
number of persons, absolutely without limit from three 
upward, may form themselves into a corporation for al- 
most any lawful business purpose, frequently with no 
limitation as to amount of capital, and usually at slight 
expense and by simple legal formalities under general 
statutes. This new liberty and facility of association 
and combination of capital, skill and endeavor undoubt- 
edly account largely for the fact that in the past fifty 
years the commercial nations have made more progress 
than during the previous ten centuries. The new eco- 
nomics and statesmanship recognize that within certain 
broad lines it is far better, both for the individual and 
for society, to have this freedom of contract with cor- 
responding freedom of association and combination, 
even if microscopic and detailed competition be some- 
times thereby incidentally restrained, than it would be io 
have absolutely unrestrained competition at the sacrifice 
of that commercial and industrial freedom. 

Concurrently with the development and the enjoy- 
ment of this economic liberty has developed the marked 
modern tendency toward large-scale production in the 
interest of greater economy and efficiency. Larger and 
still larger manufacturing plants and proportionately in- 
creased equipments of capital have become the conspicu- 
ous feature of the industrial world, with competition 
raised to a higher level, somewhat humanized and ren- 
dered more scientific. From this has come great advan- 
tage to the community. 



12 TRUSTS OR COMPETITION? 

To the accuracy of the foregoing sketch most think- 
ing persons would agree. But here we come to the part- 
ing of the ways: 

(1) Intelligent advocates of the modern trust sys- 
• tern claim that it is only the natural and ultimate step in 

that economic progress whose previous stages nearly all 
have observed and approved; it is the normal outworking 
of the principle and practice of competition; it is itself 
the ideal form of competition, giving to society the fruits 
and benefits of competition without its waste and in- 
humanity. 

(2) Intelligent opponents of the modern trust sys- 
tem contend that it is unnatural; a perversion of the 
currents of economic advance; a violent ejectment or sus- 
pension of the principle of competition, and, in propor- 
tion to its success and prevalence, a return by another 
road to the odious reign of monopoly. They believe that 
the trust system will do one of two things, either force 
society forward prematurely to a crude and possibly dis- 
astrous system of state ownership, or compel society in 
self-defense to make a partial return upon the road, by 
renewing the application of common-law restraints to 
the freedom of contract, association and combination. 
They remind us that civilization means liberty with law. 
They hold that always and everywhere under the new civ- 
ilization the law, both written and unwritten, which has 
accompanied and conditioned the modern freedom of 
contract, association and combination has said to every 
citizen: Your industrial freedom must be exercis^L 
within the lines of public welfare, which is secured by 
effective competition; you have broad liberty of combina- 
tion for rightful ends, you have none for purposes in- 
jurious to society; you may associate and combine to 
compete; you shall not associate and combine to monopo- 
lize. They insist that, whatever may be the fact in Eng- 
land since the decision of the Mogul Steamship case, our 
American jurisprudence, our legislation and our uni- 



XO ROOM FOR THE PESSIMIST. 13 

form application of the common law unite with unbroken 
custom and with public sentiment to uphold this view. 

The line of cleavage is distinct. The issue is simple 
when stripped of rubbish, of vituperation and of irrele- 
vant debate about details of responsibility and of reme- 
dies. The trust system is defended by the statement of 
this broad proposition: All are free to compete; where 
there is freedom to compete there can be no monopoly; 
where there is no monopoly there is no occasion for com- 
plaint. And this answer is made: A system of effective 
competition is essential to the public welfare; where there 
is freedom or power to combine for the purpose of mo- 
nopoly, effective competition is impossible. The trust 
system consists of the exercise of the power to combine 
for the purpose of monopoly; to whatever extent it pre- 
vails or survives, effective competition is suppressed. 
The two things are incompatible; they cannot exist in 
the same field at the same time. 



But in all this sharp conflict of ideas and of interests 
there is no standing room for the pessimist. The Anglo- 
Saxon race never yet encountered an economic problem 
which it did not solve, and this one of the trust is to be 
no exception, 



14 



TRUSTS OR COMPETITION? 



It is true of all revolutionary changes that their results are 
neither so good nor so bad as optimists and pessimists respectively 
predict. So in the case of the trust movement the outcome will 
probably represent a medium between the expectations of its 
champions and the apprehensions of its opponents. 




^Mi 1 1 



WHICH MOST NEEDS " PROTECTION ?" 



CHAPTER I. 
THE ARGUMENT FOR THE TRUST. 

Free Competition a Failure— Not a Permanent Economic Law— Advan- 
tages of the Trust System— Consumers, Producers and Workmen 
Benefited— Commercial Panics Prevented— Organized Labor and Or- 
ganized Capital— Lower Prices and Better Goods— Enlargement of 
Foreign Trade— Trusts Not Monopolies— Certain Criticisms An- 
swered—Legal Basis of the Trust— The Unified Industry a Permanent 
Institution. 



The merits claimed for the trust system by those 
who are prominently and responsibly connected with it, 
and by those economists who have only a scientific or 
professional interest in the theme, but who have reached 
conclusions favorable to the new movement, can be 
briefly and clearly stated, for they are mostly on the 
surface of things. In the following summary of reasons 
why the trust has come and why it ought to be accepted 
as a good and permanent thing, the Editor has aimed 
to winnow from the copious literature of the subject, and 
then reproduce in his own words, every argument which, 
because of its character or its source, is entitled to place. 
Possibly here and there some arguments of the future 
have been anticipated. Not all of these reasons could 
properly be attributed to, nor perhaps would all be ac- 
cented by, any one advocate of the new movement as a 
whole. 

L Free Competition a Failure Under Modern Con- 
ditions. — In the process of economic development free 
and unregulated competition may cease to be preserva- 

15 



16 TRUSTS OR COMPETITION? 

tive, and become destructive, of healthful business, and 
thus of the general welfare. Competition, from being 
the "life of trade" may become the destroyer of all that 
which makes trade most valuable to the community. 
Such a point has been reached in some lines of industry 
in the United States and elsewhere. In those industries 
unified ownership and management can be used to limit 
or prevent actual competition without destroying the 
competitive principle, and with benefit alike to con- 
sumers and to those engaged in production. 

Except in those pursuits where there is no occasion 
for tense business rivalry, free competition is commercial 
warfare and is accompanied by practically all the evils 
of genuine war except the actual killing and maiming of 
men. And even here the parallel is not wholly wanting. 
Every vfctory in the competitive conflict means a defeat 
for the other side, and where defeat means bankruptcy 
and a broken spirit, physical death not only results in 
myriads of cases, but is often a welcome refuge from a 
tempest of disaster. In competition the battle is em- 
phatically to the strong, often regardless of whether the 
strength be of the noble or ignoble sort. The highways 
of business are strown with the wrecks of fortunes, of 
hopes, of families, of homes and of lives. Nothing is 
sacred when it stands in the way of the iron law of the 
survival of the fittest. Whether necessarily or not, yet 
with absolute certainty, the Golden Kule goes out when 
unbridled competition comes in. Even John Stuart Mill, 
the unbending apostle of the Let Alone^ theory, leaves 
the beaten road of economic discussion long enough to 
paint a lurid and truthful picture of the evils of the 
unending competitive battle — evils for which he could 
suggest only the slightest alleviation. 

And this warfare has grown more severe and more 
destructive of wealth, of happiness and of life with the 
advance of civilization. With the ever-progressive in- 
vention and application of novel methods and machinery, 



FREE COMPETITION A FAILURE. 17 

larger and larger plants and greater and greater capital 
have become necessary in the manufacturing industries. 
Year by year it has been found that the smaller estab- 
lishments cannot successfully compete with the larger 
ones. The latter by mere reason of greater capacity and 
output can accomplish economies which alone equal a 
fair profit and which leave the smaller competitors out 
of the race. Hence the necessity for the smaller to en- 
large by consolidation and adopt the best modern meth- 
ods or go to the wall. And this process goes on in an 
ever ascending scale. The factories which yesterday 
were largest and led the trade are to-day distanced by 
new concerns of still greater proportions and capital, 
capable of introducing still greater economies and cut- 
ting cost of production to still lower figures. The in- 
dustrial giants of ten years ago have been dwarfed by 
the greatef giants of the present, and they must them- 
selves enlarge, consolidate with each other, or sink in- 
vestment and go out of business through the gateway 
of insolvency. Obviously all this could have but one 
ending, and it has come in the form of a massing of all 
important competitors in a single corporation, with a 
general truce to warfare. The individual manufacturer 
in an unorganized industry where competition is keen, 
often finds himself between the upper and nether mill- 
stone — the labor-union forcing wages up, without regard 
to profits of the business, and bull-headed competition 
among manufacturers, usually approved by an ill-in- 
formed public sentiment, forcing prices dow T n. Between 
these two opposite and converging forces the manufac- 
turer stands, like the fabled prisoner, the walls of whose 
cell slowly but steadily moved inward upon their waiting 
and uncomfortable victim. From such a predicament it 
is not strange that the proposal to join a trust should 
prove a welcome escape. 

Waste Through Competition. — While the main ele- 
ments of waste through competition are set forth else- 



18 TRUSTS OR COMPETITION? 

where in this argument under the sub-title, "Reduction 
in Cost of Producing/ 7 etc., reference to one aspect of 
this fact is in place here. Under free competition, when 
failure is threatened to a defeated competitor, the in- 
vested capital cannot be withdrawn and applied else- 
where. A modern manufacturing plant is almost ab- 
solutely worthless for any purpose except the special one 
for which it was built and equipped. If it cannot be run 
at a profit in that specialty, it ceases to be an asset and 
becomes junk. The investment is a total loss. Hence 
the tenacity with which beaten manufacturers cling to 
a lost cause, hoping against hope, continuing a battle 
that has already gone against them, struggling with in- 
creased desperation the nearer the final catastrophe. 
The waste of wealth due to unrestrained competition 
would, if saved, go far to enrich the community every 
year. And this waste finally falls for the most part on 
the general body of consumers — the much enduring pub- 
lic. Disaster to any industry usually means misfortune 
to society, and conversely the steady prosperity of the 
manufacturing industries of a people is both the index 
and a leading cause of good times for all classes. 

Free competition is not a permanent and universal 
economic law, as gravitation is a permanent and uni- 
versal physical law. Old-time economists so regarded it, 
as the ancients believed the sun moved round the earth, 
but in both respects the world is wiser at the dawning 
of the 20th century. Absolutely free competition is de- 
sirable wherever and wiienever it will produce results 
which are better than those that any t)ther policy would 
produce. At other times and under other conditions it 
should and does give place, first to restraint and regu- 
lation and then by mutual agreement among competi- 
tors, if need be, to varying forms and degrees of mo- 
nopoly. Natural monopolies, or monopolies of situation, 
are familiar to all and complained of by few — street rail- 
ways, gas and water works, telegraph, telephone, etc. 



ECONOMY OF LARGE-SCALE PRODUCTION. 19 

Now comes, through the orderly evolution of economic 
forces, an additional form of so-called monopoly, under 
which several competitive establishments, asking no 
special privileges from any source, are merged into one 
corporation or concern under a single ownership and 
management, and for the frankly avow r ed purpose of 
getting the maximum of advantage from the largest 
possible aggregation of capital, talent and influence; ad- 
justing supply to demand, and of eliminating competition 
as completely as practicable, thus assuring continuous 
prosperity to the consolidated industry, satisfactory 
profits and dividends to its allied owners, and incidental 
but inevitable benefit to employes and the general public. 
II. Reduction of Cost of Producing and Marketing 
Commodities. — The magnitude of this economy in pro- 
duction and distribution under the trust system of as- 
sociated capital with competent management, is scarcely 
realized by the general public. Thus: (1) The unified 
industry will presumably be directed by the ablest men 
previously identified with its several units, and this fact 
is the main guaranty of success for the new organization. 
It is safe to assume that sentiment and favoritism will 
seldom have influence in selecting managers and high- 
class employes from the assortment of trained talent at 
the disposal of each trust. A purpose to secure the 
greatest possible efficiency of organization and direction 
will govern, except in those ill-born combinations which 
the folly of their projectors has doomed to short and 
malodorous careers. (2) Each manufacturing plant will 
be utilized for producing only the kind and grade of 
goods for w r hich, by its capacity, equipment and location 
it is best adapted. It is a leading weakness of the com- 
petitive system that in many industries each separate 
company feels bound to manufacture several grades of 
goods, and then to market them throughout the entire 
country. (3) The business and mechanical methods, in- 
cluding patented features, of the most modern and sue- 



20 TRUSTS OR COMPETITION? 

cessful establishments will be applied to all. (4) Raw 
material, being purchased on the largest possible scale 
by the most expert buyers and by a concern having ample 
capital and high credit will be obtained at lowest possible 
prices, of better uniform quality and with assurance of 
timely supply. (5) There will be little or no temptation 
to adulteration of goods, or the doing of inferior work, 
both of which damage the offending concern in the long 
run, and uniform standards of commodities can be 
adopted and maintained, to the equal advantage of the 
manufacturer and the public. (6) The aggregate of 
stocks of goods necessarily kept on hand will be greatly 
diminished with proportionate reduction of interest, 
storage charges, insurance and deterioration from shop 
wear, etc. (7) Losses from bad credits will be practically 
eliminated through the absence of undue pressure to sell, 
and a more thorough system of scrutinizing the financial 
condition of customers. (8) An enormous economy will 
result from the reduction in marketing expenses. Under 
the new system the large item for traveling salesmen and 
for various forms of advertising can usually be reduced 
by 90 per cent. Duplicated and overlapping effort in 
this wide field is done away with. (9) Great saving re- 
sults from the shipping of goods from the factory sit- 
uated nearest to the customer, instead of shipping from 
a single center to all parts of the country. (10) The 
best brain, energy and skill of all the factories will be 
utilized in harmonious and systematic work to a com- 
mon profit-producing end, instead of being largely 
wasted and worse in a campaign of mutual circumven- 
tion, if not of mutual destruction. 

III. Advantages to Employes. — Reason and experi- 
ence lead to the conclusion that many important bene- 
fits must accrue from the trust system to the workmen 
employed in the industries affected. 

(a) Steadiness of employment and certainty of pay. 
— It would be a very stupidly managed corporation which, 



BENEFIT TO WAGE-EARNERS. 21 

having practical control of an industry for the whole 
country, could not and would not so conduct its affairs 
as to keep its various plants in operation with a degree 
of constancy not approachable under conditions of free 
competition, and observation shows that this is in fact 
accomplished. Every well-informed person knows that 
the shutting down of a plant even for a short period 
causes a serious loss and manufacturers avoid such a 
step except under compulsion. Under trust methods 
production can be seasonably regulated to suit probable 
trade requirements, instead of alternately glutting the 
market with unneeded w T ares at unprofitable competitive 
prices, and then closing down factories and laying off 
the force to await consumption and renewed demand. If 
improved methods and the readjustments made neces- 
sary by the change to the trust system tend at first to 
displace a small percentage of w 7 age-earners, this ten- 
dency is offset by the increased demand for labor to 
supply the goods for new foreign markets opened by 
these great combinations of capital and aggressive 
energy. 

(b) Better Wages. — Starvation wages to artisans are 
almost invariably due to low profits or no profits for 
proprietors. Mill owners who are prospering fairly well 
are, as a rule, glad to share that prosperity with the 
workmen who contribute to produce it. And this need 
not be mainly from humane motives, but simply because 
it is "good business." It is a chief indictment against 
the old system of free competition that it always and 
everywhere crowds down wages by abnormally crowd- 
ing down prices and profits; and, what is still worse, 
that system creates a sort of chronic "submerged tenth" 
among manufacturers w 7 ho are always cutting prices to 
forces sales and realize needed cash, and is ever driving 
a certain percentage of employers into insolvency or en- 
forced retirement from business through liquidation, 
which means in each case throwing the factory hands 



22 l TRUSTS OR COMPETITION t 

into idleness and their families into distress. Industrial 
history proves that the leading trades controlled by 
trusts have paid better and steadier wages than most 
others conducted under the system of free competition. 

(c) Better Relations Between Labor and Capital. — 
Higher wages with steady employment will naturally 
remove nine-tenths of the usual causes of friction be- 
tween employer and employed. But other influences are 
at work which make for peace and a good understanding 
under the new system of unified industries. Jealousies 
and rivalries between competing companies, which often- 
spread to the men of each concern, are done away. 
Substantially all who work in a given line are under 
one employer, and will naturally feel a sense of solid- 
arity, which is not possible where several employers are 
at swords-points with each other. Then in case of ques- 
tions arising which need adjustment, committees of the 
workingmen have but one authority to confer with in- 
stead of a dozen or fifty, a fact which tends to assure 
prompt and reasonable action. One concern will not 
be tempted to hire away the best men of another or to 
tamper with the loyalty of expert employes. In one great 
and permanent organization, covering an entire industry, 
systems of insurance, profit-sharing, old age pensions, 
and other beneficial aids for workingmen are possible 
and probable, which would be wholly impracticable in 
smaller, weaker and scattered establishments. 

As to apprentices. — This vexed problem can be more 
easily solved under the new system than under the old. 
Uniformity of practice and requirements can be applied 
which shall be just to each trade and fair to the lads who 
wish to enter the ranks of skilled labor. 

IV. — Benefits to the Public. — If it were to be shown 
that the trust, or the system of unified industries, is 
necessarily and on the whole hostile to the public wel- 
fare, by that fact its doom would be sealed and a limit 
fixed to its duration. No important economic movement 



AN INDUSTRIAL BALANCE WHEEL. 23 

can be long-lived which plainly runs counter to the best 
interests of mankind. From this elemental fact springs 
the assurance that even if the worst fears of pessimists 
prove well-grounded, our present retrograde industrial 
revolution will be set aside like any other spurious re- 
form and the normal order restored. But following are 
the reasons urged by advocates of the new departure for 
believing that it will bring to the masses of the people, 
as they say it cfearly does to the manufacturers and 
their workmen, advantage and not injury: 

1. Banishment of War Methods. — If the evils of un- 
restrained competitive warfare heretofore outlined ap- 
proach in magnitude the estimate given even by the 
stoutest defenders of that system, and if the trust 
movement will materially modify those evils without 
generating greater ones, then, to that extent, it stands 
justified as a change beneficial to society at large. To 
whatever extent industrial and commercial peace is 
made to supplant industrial and commercial w;ar, good 
and not evil is done. The accusers of the trust system 
concede that it does bring, coextensively with its scope, 
mitigation and often termination of competitive strife; 
but they charge that it produces countervailing wrongs 
which leave as a net result general injury and not ben- 
efit. This is denied, and will be considered further on. 

2. A > T eeded Industrial Balance Wheel. — Besides 
harmonizing by unifying a given industry, the trust 
system, in proportion to its adoption and prevalence, 
provides a regulating and steadying force in the busi- 
ness life of the country which nothing else, not even the 
banking system, has been able to furnish, and which has 
incalculable value. Without its balance-wheel and gov- 
ernor the steam engine would tend to run away with 
itself and produce disaster. The industrial community 
under the reign of free competition is an engine without 
any regulating element. In prosperous times or periods 
of active demand manufacturing establishments multi- 



U TRUSTS OR COMPETITION? 

ply, built on the hopes and overconfldence of sanguine 
and often inexperienced men; producing capacity is in- 
creased absurdly beyond any possible average consump- 
tion; then comes the inevitable glut and depression; the 
aggregate demand is not sufficient to keep one-half the 
plants running, yet each holds out as long as possible 
rather than face the loss of closing down, thus aggra- 
vating by still further overproduction a trade condition 
already dangerous. The end comes in unprofitable 
prices, starvation wages, then failures of the weaker 
concerns, stress and strain for the stronger ones, loss 
of employment for workmen and extinguishment of their 
purchasing power, and last, if other conditions favor a 
crisis, the industrial breakdown sets the pace, gives the 
signal, and the community finds itself in the midst of 
that periodic insanity — a financial panic, with its terror 
and widespread ruin. This, in substance, is the undulat- 
ing history of nearly every manufacturing community, 
though, of course, the circumstances infinitely vary and 
a dozen minor causes may contribute to the untoward 
result. 

Here comes the new force — association, combina- 
tion, consolidation, the trust. Assuming that it is suc- 
cessful, it removes by the very logic of its existence 
most of the temptation to this industrial expansion and 
ballooning in times of general prosperity, and thereby 
equally removes, within its sphere, the possibility of en- 
suing collapse and commercial catastrophe. The saga- 
cious and cool-headed managers of the unified industry 
see to it that, while manufacturing capacity is kept fully 
equal to maximum demand, it does not foolishly outrun 
it. They have no temptation to permit serious over- 
production, with consequent cessation of profits. They 
make very sure that their particular industry prospers 
with the general prosperity, and when the ebb-tide sets 
in they are in position to adjust their affairs to the 
change without shock, without friction, without hard- 



LOWER PRICES AND BETTER GOODS. 25 

ship to employes, without loss of solvency, and hence 
without contributing to panic conditions and possibili- 
ties. A great industry so organized and so conducted, 
with its business interests, connections and influence 
ramifying throughout the country, is surely a conserva- 
tive and preservative power. This steadying force, this 
element of general commercial safety, can be made to 
render a service to society, in the prevention of panics, 
which alone will compensate for any apparent or minor 
drawbacks of the trust system. 

3. Lower Prices and Better Goods. — Under the 
head of "Reduction of cost of manufacturing and mar- 
keting commodities," we have already named several 
elements of benefit to the general public, such as better 
protection against unsanitary practices and adulteration 
of goods, greater facility ,m otherwise exercising the 
police powers of the state over industrial methods and 
establishments. But, unless the trust system is to prove 
a failure, the fundamental advantage which it is to con- 
fer upon the public must be the furnishing of better 
goods at lower prices than the system of competitive 
w T a*r would supply. This is the theoretical, the logical 
and it must be the actual outcome or the trust has no 
sufficient excuse for being. Its advocates contend that 
up to date every w T ell-matured trust has accomplished 
this result, and the doubter is pointed, for examples, to 
the price and quality of our common illuminant, kerosene 
oil, under the Standard Oil Trust, as compared with the 
prices and quality prior to the existence of the present 
practical monopoly; the same as to the price and quality 
of sugar since the arrival of the Sugar Trust. 

Where apparent exceptions to this rule occur they 
will be found to be due to one of three causes, no one 
of which is necessarily a reflection upon, or an argument 
against, the typical or ideal trust: A rise in price of a 
commodity following the formation of a trust is usually 
due (a) to the fact that such formation followed a period 



z6 TRUSTS OR COMPETITION 1 

of competitive depression and unprofitable prices, mak- 
ing a reasonable rise to a profit-producing level justifia- 
ble; (b) to the fact that the organization was coincident 
in time with a general business "booni," with increased 
demand and advancing prices in all lines, as in 1899; 
(c) or to the fact that the particular trust is for the 
time being in the hands of unwise managers who fool- 
ishly assume that control of a practical monopoly gives 
license to "get all you can from the public." Such man- 
agers will learn better some day or they will land their 
business in a bog.. 

The only legitimate and sufficient reasons for chang- 
ing over an industry from the system of free competition 
to the consolidation plan are, (1) that peace is better than 
war and (2) that out of the resulting economies and other 
advantages of the trust-method there is created a fund 
which can be and will be used to give owners better and 
more regular profits, workmen higher and steadier wages, 
and consumers better goods at lower prices. 

4. Enlargement of Our Foreign Trade. — The sever- 
est critic of the trust system must admit that the re- 
cent phenomenal growth of our trade with foreign 
nations has been singularly coincident with the move- 
ment for consolidating or unifying our great industries. 
A careful analysis of that growth shows that it is not 
mere coincidence, but that the two events bear the rela- 
tion of cause and effect, so far as that trade expansion 
affects manufactured products. Nothing but the vast 
aggregation of capital, knowledge and experience known 
as the trust could have accomplished such startling and 
gratifying results. Warring and relatively weak manu- 
facturers, jealous of each other and largely ignorant of 
foreign trade conditions and requirements, could never 
have met and vanquished foreign competition and in- 
vaded foreign markets as our great modern corporations 
have done and can evidently continue to do with increas- 
ing efficiency. The value to our whole country of this 



WIDE DISTRIBUTION OF OWNERSHIP. 27 

enlargement of our trade which is only a promise of 
greater things along the same line, can scarcely be esti- 
mated. Our producing capacity is at least double our 
own people's consumption. An outlet was absolutely 
necessary for our surplus, and that outlet has been pro- 
vided largely by the much criticised trusts. 

5. Opportunities for Investment. — One of the great- 
est benefits that can be -conferred upon society is to fur- 
nish to all classes a continuing opportunity for investing 
savings or other surplus capital in a manner that shall be 
reasonably safe and reasonably remunerative. The re- 
cent scarcity of such opportunities has been keenly felt 
by multitudes of people whose dependence is wholly or 
partly on the income from invested funds. These include 
thousands whose sex, age or physical condition prevents 
their engaging in bread-winning pursuits. To these in 
common with the general public the unification and cap- 
italization of industries now progressing furnish a form 
of investment af once convenient and satisfactory. If 
half that is said against the purposes of the trusts is 
true their net earnings are pretty sure to be sufficient to 
make the securities issued by them both safe and profita- 
ble, and this in spite of those occasional consolidations 
which are unwisely or dishonestly launched or managed. 
"Industrials" are already a widely popular form of in- 
vestment. 

Another aspect of this same matter of investments 
is almost equally salutary and important, namely, the 
wide distribution of these securities, and hence of owner- 
ship in the trusts throughout this country. It is the 
greatest possible mistake to suppose that the bulk of 
the stock and bonds of these great industrial organiza- 
tions are locked up in the vaults of the rich. Doubtless 
men of wealth and great moneyed institutions avail 
themselves of the opportunity to get their share of what 
they believe to be a good thing, but a far greater propor- 
tion is passing into the hands of the thrifty middle class 



28 TRUSTS OR COMPlilTlTtONi 

throughout the country, in amounts graduated to the 
requirements of persons of small or moderate means. 
The conservative effect of such a condition of things is 
readily recognized. 

6. Advantage to Owners. — It is not irrelevant to men- 
tion last, as an element of benefit to the public, the ad- 
vantage which industrial consolidation usually brings 
to those citizens who have been the proprietors of manu- 
facturing plants under the competitive system and who 
almost universally continue'to be interested, at least, as 
stockholders, in the resulting trust, when an industry 
is consolidated. These citizens are surely a part of the 
public, and their legitimate prosperity should not be a 
matter of indifference, much less of offense, to their fel- 
low men, if, as is stoutly insisted, that prosperity involves 
no detriment, but rather advantage to the people at 
large. 

V. Some Criticisms Answered. — Objections to the 
trust method of handling great industries, though for- 
midable in appearance, are reduced by analysis to those 
mentioned below, and while some of them are of such a 
nature that they can be finally answered only by a com- 
prehensive experiment with the new plan, they are en- 
titled to attention here. 

The Displacement of Employes. — The change to the 
new system undoubtedly involves an important read- 
justment of industrial forces. Some out-of-date and un- 
profitable factories here and there will certainly be dis- 
mantled and the work which they have previously 
done poorly and expensively, will thereafter be done 
well and cheaply in the large, modern and perfectly 
equipped establishments owned by the trusts, or, when 
required, new, favorably located factories will be built 
to meet the demand. But the process of weeding out 
the "have-beens" among factories is only slightly has- 
tened by the coming of the trust. The competitive 
struggle for existence with survival of the fittest was 



SOME CRITICISMS ANSWERED. 29 

everywhere doing the same work of elimination. Then 
it must be remembered the consumption of commodities 
will go on and go on increasing even more rapidly under 
the trust system than before, and at least as many arti- 
cles or units of production must be turned out as ever. 
There can be no material reduction in the number of 
manual days' work required in factories, except as im- 
proved machinery progressively displaces hand-labor — 
and this change is not due to the trust. In other words, 
the trust movement will shift the location of some work- 
ingmen; it will temporarily displace a few others by 
running one factory on full time the year round in place 
of running two on short time or spasmodically, but after 
a brief period of rearrangement and allowing for steady 
growth of demand for goods, the industrial change can- 
not diminish the aggregate demand for labor or other- 
wise impair the condition of the artisan class. 

The apprehension is expressed in some quarters that 
under the new system, which removes the workman still 
further from his actual employer, the tendency will be 
to make the duties and position of the factory employe 
more perfunctory and machine-like, and himself a fix- 
ture in his place and vocation, thus impairing his in- 
dependence, his interest in his work and causing him 
to deteriorate in manhood and mental alertness. Solici- 
tude in this respect is probably groundless. In prac- 
tice the workmen will usually recognize absolutely no 
change in their surroundings in the plant where they 
are employed, because of its passing into the hands of 
a trust. No detrimental effect upon employes has been 
observed in those trusts which have had greatest dura- 
tion and experience. A similar accusation was seriously 
brought against the factory system a generation ago. 
Of this parallel instance President Hadley of Yale 
in his work, "Economics" (1S98), speaking of the 
charge, that the factory system tends to deprive the 
laborer of independence, and reduce him to the position 



30 TRUSTS OR COMPETITION? 

of a machine says, "we may safely deny that this change 
is causing an intellectual decline among the masses.'' 

Traveling Salesmen. — The discontinuance of the 
services of many traveling salesmen comes under a dif- 
ferent rule. It is to be frankly admitted that this line 
of employment, which is so closely identified with the 
outgoing competitive system, will be seriously interfered 
with by the pending change, and that many worthy and 
able men will need to adjust themselves anew to the 
work of life. As the leading argument for the trust 
is a sweeping economy in cost of producing and market- 
ing commodities, the effect of this economic change must 
fall somewhere, and the traveling salesman happens to 
be the one whose services become w T ell-nigh unnecessary 
under the new way of carrying on an industry, because 
those services have represented a part of the waste of 
the former system. The case is almost an exact parallel 
to the effect produced upon a humbler class of employes 
when the introduction of modern machinery and the fac- 
tory system displaced hand-labor. In both cases genuine 
hardship temporarily ensues to those directly affected. 
There is friction and naturally indignant protest at the 
displacement, but a great forward movement in eco- 
nomic development never has been and never can be 
obstructed by personal considerations of this nature. 
On the other hand, the displaced artisans of other days 
were surprised at the promptness with which their serv- 
ices were again required and absorbed under the won 
derful impetus given to industry by the revolution which 
at first seemed so threatening. In 1865 nearly a million 
and a half of men were suddenly released from four 
years of military service on either side in our civil war. 
Scarcely one had preserved any connection with his 
former calling or pursuit. From generals to privates 
practically all of that bronzed host were "out of a job." 
Great suffering and grave disorders were predicted be- 
fore the veterans of North and South could be provided 



TRUSTS NOT MONOPOLIES. 31 

with vocations — could accomplish this tremendous re- 
adjustment of their lives. What actually occurred as- 
tonished even the most optimistic of political econo- 
mists. The two armies melted away into their respective 
communities; there was no perceptible congestion, little 
friction or suffering, and by the time the grass had 
grown again on naked earthworks and trampled battle- 
fields, every able-bodied soldier of the blue and the gray 
was busy in some bread-winning pursuit. The typical 
"drummer" is, by the very logic of his success in that 
vocation, a particularly energetic and resourceful per- 
son. Such men, even in mature life, are w r anted. New 
doors will open. 

To a large extent the same reasoning applies to 
those middlemen, commission dealers, factors and small 
independent proprietors who are displaced or crowded 
out by the coming of the new industrial system. 

Trusts Not Monopolies.— The final and most seri- 
ous-looking indictment brought against the trust is that it 
constitutes a private monopoly and therefore, in the 
words of Mr. Bryan, is "indefensible and intolerable." 
While a beneficial private monopoly can be imagined, 
let it be conceded for the present that a virtual private 
monopoly of the production and sale of any commodity 
of general use (such monopoly not being sl natural mo- 
nopoly, like a street railway, nor one authorized by law 
in the public interest, like a patent on an invention) 
would be contrary to public policy, unfair to consumers 
and hence not permissible. Then there remains this 
defense of the modern trust — that it is not in any eco- 
nomic or reasonable sense a monopoly. Monopoly of 
the sort here meant is defined by the economists and law 
writers to be "such a control of any commodity or service 
as enables the one exercising that control to hold prices 
higher than they would be under free competition." For 
the most part the so-called trusts are simply big corpora- 
tions produced by the imperious economic necessity of 



52 

_-. , ■ - il and 

> ui- 

■ 

: no: expos * : sm and ro the sup- 

-he nickname "trust All great 
per sof hrisgei ss aunry on th- an sa in 

m&l com] 

__dly in 
: mono; s^f if they are 

dail r _:_--.-.■_. 
hok: it an artifi el. 

— "." 
iriu :'rom tlie cons d by purch all 

■ii , . I in s giren i in 

start 
: - ■ . ■ - " ■ -"."._ ted S 

In reg class tMs chani- 

- - >n- 

It Ekat] tentb -tirion which eon- 

il and skill to unite 

L start peting plants nd tan Hi hei 

--■-,-_ ■ _ . > pita! and ex; ility in 

" „.._ .--.n :"" irside t Any trust ? ~he 

inducement and engage in the industry 

- resented jr the b it A it ~._ » ] and e~ 

pending ._--....; .__ :L - ~- 
tire an Eeg _ m- 

md ~"_-; ronld be the p: 

- : _ . npetiicvs n I that by this un- 

» mess - : i ::-" Ed rival: - 
on | md _ 

: t a low plane s us not to furnish a temp- 
tation i n to transform it - 

'.-_"- ti ti Vb : and finally that any 
I i w : 
: - ciereli me 



:'i:- ' -• -~~- ~ " - ~"~ 



- - _ - _ - 




34 TRUSTS OR COMPETITION? 

of the stock of the ten-million company should evidently 
command one-tenth of the price of a share of the one- 
million company. If in actual business the two com- 
panies retain their equality of actual values and net 
earnings the crucible of the stock market will promptly 
settle the matter of relative stock values. If the shares 
of the ten-million company sell at 20, that is, $20 each, the 
shares of the one-million company will simultaneously sell 
at 200, or $200 each, quite regardless of the legend on the 
stock certificates to the effect that in each case each 
share has a "par value" of $100. These elementary facts 
are fully understood by all persons who are sufficiently 
intelligent to buy or sell stocks at all. The public is not 
deceived unless it chooses to be. Besides, the fact is 
that the average and experienced investor does not care 
greatly what is the amount of actual assets possessed by 
a corporation. He looks almost solely to the record and 
prospect for net earnings, the ability of the company to 
pay interest and dividends. He knows perfectly well 
that the plants and other assets of nine-tenths of manu- 
facturing concerns would not in case of suspension and 
liquidation sell for one-tenth part of the current valua- 
tion of the going business. Earning power and good 
will are the elements of chief value in any such invest- 
ment. A well-known newspaper is capitalized at $100,- 
000, that is, 1,000 shares of "$100 each," but the shares 
sell, when any holder will sell at all, at more than $1,000 
each, making the market value of the property more than 
one million dollars. Yet all the tangible assets of the 
company could be duplicated for less than $100,000. 
(2) If such over-capitalization exists in some cases and 
if in those cases the managers of the trusts atteriipt to 
earn sufficient profits to pay dividends on much fictitious 
capital, they will thereby invite competition from out- 
siders who are content with a fair return on actual cash 
investment and who, therefore, having far less fixed 



THE LEGALITY OF TRUSTS, 35 

charges to provide for, can undersell the trust in the 
market. 

The Legal Objection. — This is not the place to dis- 
cuss the legality of the trust, but the claim in this re- 
spect made by the friends of the new system may be 
briefly stated: (1) Where one corporation simply buys 
and pays for the manufacturing plants and businesses 
constituting a given industry in the United States and 
thereafter conducts its affairs in a lawful manner it is 
^difficult to see how it can be successfully charged with 
creating or promoting a combination in restraint of 
trade. A corporation, being a legal unit, cannot com- 
bine or conspire with itself. (2) It is difficult to see how 
such purchase and resultant unified ownership can be 
judicially declared invalid without nullifying that free- 
dom of contract which is impliedly guaranteed to every 
citizen by the federal constitution. This position is held 
to be impregnable in spite of some decisions by state tri- 
bunals, like that of the Illinois Supreme Court in the 
Glucose Case (1899). In due time when a test case has 
reached the federal Supreme Court it is expected that 
a decision will be handed down which will dissipate all 
doubt and end all discussion concerning the legal basis 
of the modern trust and the legal safety of investments 
therein. Even courts are bounu to recognize accom- 
plished revolutions. No tribunal, however exalted, can 
undo history and cause things to be as though they had 
not been. Our industries are already merged in the 
trust form or system, and they can no more be put back 
into the former competitive system than can the states 
of our Union be forced back into the position of colonies 
of England. 



Finally, the trust is here. It is not a hostile invasion 
from without, but has been evolved from our own con- 
ditions by our own people. The universality of the 



36 TRUSTS OR COMPETITION? 

movement proves it to be natural and probably in- 
evitable. If, in fact, it is an agency of great potency and 
great possibilities for good, when rightly utilized, shall 
it be so utilized or shall the new system toe wrecked in 
common with the general prosperity, by a tempest of 
popular passion born of prejudice and misinformation? 



A FURTHER FAVORABLE VIEW. 

By Dr. Albert Shaw, Editor of the Review op Reviews. 



THE COMBINATION OP CAPITAL. 

If the organization of labor, even to the extent of the com- 
plete and monopolistic control of a great many important trades, 
is defensible and is a part of the natural and unavoidable move- 
ment of economic society in our age, it may be none the less true 
that the combination of capital engaged in a given line of in- 
dustry is also in the main trend of our economic development, 
and therefore not to be prevented either by denunciation or by 
enactments. Up to a certain point the old-fashioned competitive 
system was not wasteful, but, on the contrary, afforded a useful 
regulation of production and of price. The whole tendency, how- 
ever, of business progress — especially in a country like ours 
where vastness of natural resources and the rapid growth of 
population promote the growth of small businesses into enter- 
prises conducted on a large scale— seemed to render the competi- 
tive system inadequate and wasteful. 

RAILROAD AMALGAMATION. 

In the case of particular enterprises protected by the patent 
laws, for instance, the economies of production on a large scale, 
and also of distribution freed from the special expenses that 
competition entails, we/re very readily apparent. In railroad 
management competition beyond a certain point proved to be 
costly for the patrons of the roads as well as disastrous 
for the owners. Consolidation came to be the order of 
the day, with the result of the evolution of a few large systems. 
Under the operation of these methods freight rates became lower 
and lower, so that the general public, far from being the victims 



DR. ALBERT SHAW ON THE TRUST. 37 

of transportation monopoly, have been its most obvious bene- 
ficiaries. This remark, of course, is to be taken with many 
modifications* when applied in a specific way. Individual patrons 
of railroads have suffered wrong through favoritism shown to- 
ward their business rivals. Particular communities, also, have 
suffered through an a/rrangement of rates which favored the 
upbuilding of competing centers. The railroad systems of the 
country have by no means been perfectly administered in this 
new era of consolidation. Nevertheless there are few people 
who would not be ready to admit that railroad service is much 
cheaper and better now than it ever was before in the United 
States, and that it is cheaper and better here than in other 
countries. 

ADVANTAGES OF UNITED MANAGEMENT. 

It would seem good for everybody to have railroad trans- 
portation removed almost or quite wholly from the sphere of 
competitive business. The public is not benefited in the long run 
by rate wars between great trunk lines. Joint traffic agree- 
ments of a pooling nature may indeed be contrary to both 
the letter and the spirit of the Interstate Commerce Act; but the 
actual maintenance of non-competitive rates and a certain 
amount of co-operation in the distribution of business, is not only 
better for the holders of railroad shares, but it is also better 
for the shippers of goods and the traveling public than rate-cut- 
ting, secret rebates, and the administration of railroad systems 
in a spirit of warfare against other systems. The fact is, of 
course, that the old-fashioned competitive system^ carried to a 
logical extreme, is closely analogous to warfare; and the whole 
tendency of our civilization is away from Ishmaelitish methods, 
and is moving nobly and wholesomely in the direction of co- 
operative and peaceful methods. The worst about our railroad 
system, in times past was not the danger of its drifting into 
monopoly, but the unnecessary and speculative construction of 
competing lines, the kindred evil of overcapitalization, and the 
mischievous issues of securities that represented neither actual 
investment nor developed value. " These methods were bad, of 
course, for the country at large; but probably the worst sufferers 
from them were not the communities through which the railroads 
passed, but the people who were deluded into buying the fictitious 
stocks and unsafe bonds. 

PUBLIC WELFARE NOT MENACED. 

For many years the railroad systems of the country have 
been going through the stage of financial reorganization as a 
penalty for the reckless and improper methods of the 60s and 70s. 



38 TRUSTS OR COMPETITION? 

The clear tendency of the times is to knit together yet more 
closely the whole texture of the country's railroad system. It 
is not at all impossible— so swift is the movement nowadays of 
industrial and financial combination— that all the railroad sys- 
tems of the country might, in the not very distant future, be 
amalgamated into one great corporate whole. Nor is it to be 
taken for granted without careful thought and study that such 
a consummation would be deplorable. The legislative power 
to regulate railroad rates has become established in practice and 
is firmly upheld by Ihe decisions of the courts; and the state 
also possesses the power of taxation. It is not easy to see, there- 
fore, how the community can be in danger of losing its liberties 
through the further reduction of the railroad network of the 
country to a complete and unified system under one harmonious 
control. Nor would it seem to matter very much whether this 
issue came about through the legalization of pooling contracts 
or through the actual consolidation of railroad properties. This 
will seem a hard saying to many readers holding the old anti- 
monopoly views. 

PUBLIC OWNERSHIP A SUBSEQUENT ISSUE. 

It would be so much the easier for the Interstate Commerce 
Commission to secure uniform, accurate, and intelligible rail- 
road accounting; and with perfect publicity the rate-making and 
tax-levying authority of the state and nation could exercise all 
needful control. Under such conditions, if the time should ever 
come when public ownership and direct operation or the railroads 
should be deemed desirable, the transfer could be brought about 
in a very simple way on ^some such plan as the exchange of 
government bonds for railroad securities at an agreed market 
value. The thing to be desired is the elimination from the rail- 
road business of all speculative elements, so that after expenses 
of operation and maintenance are paid, and the managers and 
employes receive fair salaries and wages, there should remain 
* just eno-ugh profits to pay interest and dividends upon an honest 
capitalization. This process seems to be working out through 
natural business laws. When it is pretty well completed it will 
be soon enough, in the United States, to consider whether or 
not the state ownership of railroads is desirable; and when that 
time comes it may perhaps make no very great difference 
whether the government of the country manages the railroads 
directly or whether it leaves them to be managed by a private 
monopoly subject to public control, regulation, and taxation. 

TRANSITIONAL DISTURBANCES. 

All great transitions in the business world are fraught with 
many incidental grievances and with much temporary incon- 



THE RIGHTS OF MONOPOLY, 39 

venience. Thus most thoughtful men would hold it to be utterly 
fallacious to take the ground that it can be harmful to the 
community to introduce labor-saving machinery- On the con- 
trary, it is agreed by most sound thinkers that the invention 
and use of appliances for saving labor must inevitably add 
to the general prosperity, and ought, therefore, to be encouraged 
in every possible direction. Nevertheless, at the moment when 
the labor-saving device is introduced in any given trade, there 
results no little hardship to many individuals. It is similarly 
true in the business world that the growth of production on a 
large scale and a rapid extension of the sphere of combination 
has crowded many small capitalists, manufacturers and traders 
to the wall and caused no little loss and confusion. This, how- 
ever, involves no new principle. Competition has never at any 
stage been a merciful or considerate system of business organiza- 
tion; and it is by the methods of competition that the modern 
combination crushes out those who do not co-operate with it. 

The new combination popularly called a "trust" is ruthless 
in its opposition to surviving or incipient competitors, but its 
methods in the main are not very different from those that a 
powerful business man fifty years ago would have used to 
break down his weaker rivals. These methods are not admira- 
ble, but it is well to remember that they belong not to the 
new system of co-operative capital, but to the old competitive 
system that the new methods are proposing to supersede. 

THE RIGHTS OF MONOPOLY. 

The method that came to be substituted [for the trust proper] 
was that of selling the properties outfight to a new corporation. 
Property rights are secure under our national and state consti- 
tutions, and one of the most vital of property rights is the right 
to sell what one possesses. If a corporation may be formed for 
the purpose of one sugar refinery, it will in practice be difficult, 
if not impossible, to prevent its purchasing or building other 
sugar refineries; and there would seem no constitutional method 
by which its progress might not result in a monopoly. Such 
monopolies might, of course, pursue measures which would be 
harmful to the community and against which laws could prop- 
erly be made. The devices of public regulation and taxation 
could always be brought to bear; but against the mere fact 
of monopoly per se there would seem to be no successful form 
of legal opposition. The government Patent Office every day 
grants control over certain inventions with the avowed object 
of promoting for a term of years strict monopoly. If, in some 
field of industry not dependent upon the protection of the patent 
laws, a monopoly should arise by reason of the fact that a 



40 Trusts or coMPBTiTioNi 

single individual or firm or corporation had come into control 
of the entire production of a given article, it would not follow 
necessarily that there was any greater impropriety in this par- 
ticular monopoly than in those especially fostered by the govern- 
ment under its patent laws. 

FREEDOM WITH REGULATION. 

In a free country there must be freedom to combine and to 
co-operate just as there must be freedom to compete. On the 
other hand, the regulation and control of monopoly is permissible 
and necessary, just as the regulation of competition at certain 
points has been found desirable. Thus in the field of competition 
the laws now protect the good employer from the unfair com- 
petition of bad employers by regulating the character of fac- 
tories, the time conditions under which women and children are 
employed, and in various other ways. The tendency now shown 
in a number of our state legislatures to enact laws striking 
directly at the formation of monopolies is readily explained, 
but does not indicate very mature consideration. A, who is a 
grocer in the town of B, would naturally be glad to be the 
only grocer in the town; and if he could form a partnership 
with C and D, his principal competitors, and the new firm could 
then buy out or crowd out their smaller competitors, there would 
emerge a monopoly. The methods . used in obtaining that 
monopoly might not have been very kindly or polite, but they 
might, nevertheless, have been strictly within the pale of the 
law; and it is conceivable that the monopoly might be main- 
tained indefinitely through the economical and careful conduct 
of the business and through the policy of sharing with customers 
the benefits derived from doing business on a large scale. 

MAGNITUDE OF THE MONOPOLY MOVEMENT. 

This illustration of the grocery store applies well enough 
to most of the monopolies that pass nowadays under the title of 
"trusts." It does not follow, however, because the principle of 
amalgamation is the simple one of bringing rival properties 
under a common ownership, that the movement is any the less 
stupendous in its volume or revolutionary in its consequences. 
It is entitled to all the attention that is being drawn to it, and 
to a great deal more. It would be strange, indeed, if a move- 
ment that is changing the whole face of the business world 
should not be reflected in any manner in political and legislative 
discussion. At the present stage the public needs information; 
and the things to encourage are study and inquiry, rather than 
the attitude of furious hostility. Tlie laws that have been 
enacted with the intention of checking t£e aggregation of capital 



t'RU&TS AND GREAT FORTUNES. 41 

have certainly had no decisive effect of that sort. The opposi- 
tion to the old form of trust has simply stimulated the forma- 
tion of those more complete aggregations that involve the 
bona fide transfer of the property to a new company that thus 
absorbs the old corporations. 

COHESIVE POWER OF THE ''TRUSTS." 

The Cordage Trust was one of the earlier combinations which 
went to pieces a time or two, and which gave the public the 
impression that the combination movement in itself was con- 
trary to natural economic tendencies and might therefore be 
thwarted. But if the Rope Trust indeed was held together by 
ropes of sand, it was, a marked exception. The industrial 
monopolies, for the most part, show signs of great stability. 
It is likely enough, of course, that where they have been reck- 
lessly and foolishly overcapitalized— with the idea that monopoly 
means the opportunity to advance prices and oppress the public— 
they will come to financial grief and be compelled to reorganize. 
But reorganization in such cases means nothing very different 
from railroad reorganization. Where a railroad has gone into 
the hands of a receiver, the trains continue to run and the 
shippers and passengers see no difference. The reorganization 
is a matter of finance. A great number of so-called trusts have 
been floated upon absurd overissues of preferred and common 
stock, and the "water" will sooner or later have to be squeezed 
out. It does not follow, however, that the combination will 
dissolve into its original elements, and that its parts will go 
back to the old system of competing with one another as inde- 
pendent concerns. The probability, on the contrary, is that the 
advantages of monopoly production and distribution will be 
firmly retained. It is to be regretted that the laws in this 
country are not as rigid as those of some foreign countries as 
respects capitalization of joint stock enterprises. But the trick 
of overcapitalization, although intended to aid in fleecing the 
public by making it pay prices that would earn dividends on 
fictitious stock, is likely to react in the end upon the share- 
holders. 

TRUSTS AND GREAT FORTUNES. 

The period through which we aire passing, in which the 
competitive economics of large production drives capital in- 
evitably to seek the security of combination, abounds in those 
uncertain elements which give opportunity for the formation 
of immense fortunes, due rather to abnormal conditions than to 
relative superiority in the management of business enterprises. 
This phenomenon of the rapid growth of colossal fortunes will 



42 TRUSTS OR COMPETITION? 

doubtless continue until the transition is fairly complete and 
the gireat industries settle down to steady-going methods under 
strict public regulation. The tendency will then be for labor, on 
the one hand, and the state, through taxation, on the other, to 
absorb everything except a reasonable profit upon the capital 
employed in the monopolized enterprises. The speculative ele- 
ment in the so-called "industrials" will have a tendency to dis- 
appear as in the case of the railroad systems; and it" may be 
expected that there will come about a gradual diffusion of 
ownership in these great enterprises through the investment 
of the savings of the people in their stocks and securities, quite 
as in France, where the real owners of most great undertakings 
are working people and small investors. It is altogether too soon 
to say that the tendency to the accumulation of great fortunes 
will not be squarely offset by other and even more potent tenden- 
cies. The next census, in so far as it may carry out a special 
inquiry into the wealth of the country, is not likely to find that 
the past decade has put an increased proportion of the national 
wealth in the hands of the millionaires. It has certainly pro- 
duced the phenomenon of a larger number of multi-millionaires: 
But the advance in general prosperity of more than 70,000,000 
people easily counterbalances the abnormal growth of individual 
fortunes. 



Despair in presence of a perplexing economic situation is like 
cowardice in the face of the enemy. 



CHAPTER II. 
THE ARGUMENT AGAINST THE TRUST. 

An Explanatory Word— No War on Corporations or Capital— Large-scale 
Production Approved — Monopoly Alone Attacked— Competition Not a 
Failure— Causes of the Trust System— Method of Trust-building— 
The Men Behind the Trust— Monopoly-hunger, Not Evolution— The 
Trust an Economic Impertinence — Concerning Foreign Trusts — Some 
/ Trust Benefits Fictitious, Others Overstated— Our Foreign Trade- 
Effect of Trusts on Towns, Farms and Labor— The Do.or of Oppor- 
v tunity Shut— Eastward Movement of Industries— Competition, Actual, 
Potential and Spurious— The Giant and His Club— The Trust and 
Socialism— As to Trust Prices. 



At the outset a simple definition is necessary, al- 
though it ought not to be. Opposition to the trust system 
is solely a battle against monopoly. Among thinking 
people there is no objection to the existence of corpora- 
tions, or even of large corporations, engaged in legitimate 
business and using legitimate methods. There is no war 
on capital as such. There is no disposition to resist or 
complain of the evidently natural modern tendency to 
carry on productive industries with greater capital and 
larger plants until the maximum of economic efficiency 
within competitive lines has been reached. That which 
alone has called out the swift, indignant and well-nigh 
unanimous protest of our people is the proposition to 
substitute systematic private monopoly for open compe- 
tition in many or all of the great industries of the land. 
It is monopoly entrenched within particular corporate 
organizations and backed with aggregated capital that 

43 



44 TRUSTS OR COMPETITION? 

the public intends to reach and deal with. Corporations 
themselves, as a system or institution of all commercial 
communities, are safe from assault. 

The studied and persistent attempt on the part 
of most defenders of the trust to ignore these facts, to 
sidetrack the great discussion and dwarf the present 
storm into a teapot-tempest of ignorant passion against 
all wealth and all corporations, an attempt which is illus- 
trated in a majority of the pro-trust arguments, is un- 
worthy and futile. It cannot long confuse even the 
simple, and it cannot at all divert the course of the pres- 
ent wide debate. To this end we shall in the present 
argument usually characterize the object of remark as 
the Monopoly-trust, for there is" no other offender in 
sight. Further, the monopoly-trusts under discussion 
are not to be confounded with natural monopolies like 
railroads whose charges and conduct are perfectly con- 
trollable by government, nor with temporary special 
franchises like patents and copyrights, which are 
granted in the public interest, to encourage invention 
and literature, and which shut out society from nothing 

This claim that antagonism to the monopoly-trust is really a war 
on all corporations with their necessary aggregations of capital has no 
other warrant than this: When the courts found monopoly entrenched 
in the form of organization properly called a trust (like the original or- 
ganization of the Standard Oil and the Sugar Trust) and compelled a 
hurried evacuation of the premises, monopoly took refuge first in practi- 
cal corporation-partnership and next in single corporate ownership— the 
guise in which virtually all trusts now appear, and in which they have 
considered themselves unassailable. It is not the corporation that the 
public antagonizes; it is the monopoly housed in corporate form. It 
may become necessary to demolish certain specific corporations in order 
to reach their occupants, but this is very far from constituting war on 
corporations as such. Let this illustrate: 

An invading army, having been worsted in its first campaign, adopted 
the expedient of stationing its outposts in certain of the schoolhouses of 
the vicinity. Thereupon the troops of the invaded country trained their 
artillery on these outposts, with the natural result. Then the invaders 
shouted, "Ah, you are making war on the Schoolhouse, and the culture 
it represents," and at once proceeded to occupy certain stone churches 
near by. The patriot army was compelled to shell these also in order to 
reach the enemy, whereupon the invaders held up both hands and with 
marked sincerity appealed to the civilized world to witness that these 
barbarous people were really making war on their own schoolhouses and 
churches, on education and religion. 

He who runs may read. 



SOME NEEDED DEFINITIONS. 45 

which it previously possessed. Comparisons of the one 
with the others are fallacious and misleading. The term 
monopoly is herein employed in its usual economic and 
commercial sense of practical or virtual control of an in- 
dustry or business. There are no absolute or perfect 
monopolies, since even our postal service is in competition 
with the express companies and other common carriers. 
It is universally admitted, except by special pleaders, that 
any trust which ow T ns or controls from 75 to 90 per cent 
of an industry has a virtual monopoly of that industry 
and can do practically what it will.* * * Throughout 
no reflection is intended upon the personality of those 
who are identified with the trust movement. At worst, 
most of them have been misled by a colossal opportunity 
for great and sudden gain. A false principle and system 
only are under discussion. Industrial corporations, how- 
ever large or successful, are not properly classed as 
trusts if they are not fairly chargeable with the intent or 
the fact of virtually monopolizing an industry. 



For evident reasons the argument against the trust 
cannot be and need not be so elaborate as the argument 
in its favor. Instances occur in every field of life where 
a score of apparently conclusive reasons can be given in 
support of a proposed change, all of which are set aside 
by a single fundamental and overwhelming reason on 
the other side. A home-seeker may admit many most at- 
tractive features in a residence which he is urged to buy, 
but may offset them all with the brief answer, "It is un- 
sanitary." A business man may be convinced of many 
profit-producing elements in a policy which he is asked to 
adopt, yet reject them all with, "It is not honest." On a 
certain occasion when the economic and other glories 
of all the kingdoms of the world were portrayed and 
tendered as an inducement, the negative argument re- 
quired but four memorable words. One sufficient ethical 



46 TRUSTS OR COMPETITION? 

reason tips the scale against a cart-load of commercial 
advantages. 

Up to a well-defined point the strictly economic 
argument in behalf of the trust is strong and clear. Sev- 
eral elements in that argument are undoubtedly sound, 
and, standing by themselves, are entitled to all the con- 
sideration claimed for them. All this may safely be 
conceded, for, after all concessions are made, its oppo- 
nents contend that the trust system should never have 
been inaugurated and should now be discontinued, be- 
cause in its essence and net results it is both economi- 
cally and ethically hostile to human welfare. 

Obviously the burden of proving its case lies with 
the trust. Its arrival and existence among us constitute 
a sharp challenge to the established economic order — a 
sweeping indictment of about all that society has been 
accustomed to regard as settled and orthodox in the busi- 
ness arrangements and relations of civilized men. It 
rests with the advocates of this particular innovation 
and proposed revolution to justify their new social and 
industrial scheme. They have stated their case in a 
manner that has apparently convinced themselves and 
a very intelligent and influential section of the public, 
and has mystified and bewildered a multitude besides. 
Hitherto they have been greatly aided in this by the 
unfortunate fact that most of the utterances on the 
other side have been largely emotional and denunciatory 
instead of being reasonable and forcible — evolving far 
more caloric than illumination. One zealous antagonist of 
the trust, on being remonstrated with for his constant use 
of invective in place of argument, unconsciously justified 
his critic by replying that when a citizen wakes at night 
to find that a burglar has broken into his home and 
taken him by the throat, the circumstances do not favor 
a placid and strictly logical presentation of reasons why 
the invader should have pursued a different course. So, 
the anti-trust protest has thus far been for the most part 



TEE ARGUMENT AGAINST THE TRUST. 47 

an outcry in the dark, of mingled indignation and alarm. 
What then is the argument against the trust? 

I. COMPETITION NOT A FAILURE. 

Under the competitive system the human race has 
achieved its development, won all its victories, accom- 
plished all its progress. That it has done this largely by 
reason of, and not in spite of, that system, mankind still 
believes. Competition, the struggle for existence and ex- 
cellence, in practically every domain of human affairs 
has been the schoolmaster of the race. Under its salutary 
severity, and often by virtue of the very friction and 
pain against which men cry out, the orderly evolution 
has advanced and its flower and fruit have been reached 
in that crowning result which we call modern Civilization 
and human Character. 

Doubtless the competitive struggle has been in many 
places and times needlessly severe. Human folly has 
often introduced competition where it did not belong and 
carried it to destructive extremes without the slightest 
warrant of necessity. So the wholesome rule of gravita- 
tion has often been misapplied and untoward results have 
been encountered; yet few T , if any among us have been 
disponed to devise and apply the opposite principle as a 
new regulator of the physical universe! During the last 
two decades of the closing century more has been learned 
concerning the proper limits, province and adjustments 
of the law of competition than during all previous time. 
In the light of this new knowledge the world has been, 
with sufficient rapidity, rewriting its science of political 
economy, chiefly along the line of such a readjustment of 
competitive conditions and methods as should make 
them consonant with Christian common sense and the 
scientific spirit, without sacrificing the stimulus, the 
educational force, the open door and the public protec- 
tion which the competitive principle alone supplies. All 
thinking men have increasingly realized that the civil- 



48 TRUSTS OR COMPETITION? 

ized world has entered upon a distinctly new phase of 
social and economic development, especially involving 
great aggregations of capital, labor and managerial skill. 
Association, co-operation and magnitude in industrial 
and commercial methods gradually became the rule along 
many lines. To this central fact of the new period all 
classes were adjusting themselves, with little of protest 
or friction. That the progressive change was an orderly 
advance in response to a natural law, few doubted who 
thought clearly. The great benefits of the new method 
viewed largely compensated for the inconvenience which 
it brought to some. But — this fact stands out like a 
head-land, the new tendency, while it accomplished and 
promised great amelioration of the harshness of the self- 
regarding struggle for existence and well-being, did not 
attack or disturb the central principle of effective com- 
petition — which the people believed and still believe to 
be their enduring citadel of economic safety. 

Among the ultimate results of the progressive 
change, systematic monopoly in private hands did not 
appear on the horizon of probabilities. Much less did 
it seem among the possibilities that systematic private 
monopoly of the greatest industries of the people could 
or would, before the beginning of the new century, be- 
come an accomplished fact, defended and justified by 
many citizens as the fruit of natural and wholesome busi- 
ness evolution. 

Now, into this hopeful economic situation comes 
the trust-system, which undertakes, not to regulate and 
methodize competition while leaving unimpaired its con- 
servative vigor, but to suspend effective competition al- 
together in those industries which it controls while leav- 
ing the rest of the community immersed in the old com- 
petitive conflict, intensified by the wholesale desertion 
and unfair exemption of the owners of the monopoly 
trusts. 

More specific and concrete reasons will appear 



GENESIS OF THE TRUST SYSTEM. 49 

further on why the monopoly-trust, instead of being a 
cosmic and necessary movement is, in fact, an economic 
impertinence. 

II. CAUSES AND GENESIS OF THE TRUST. 

The causes and contributory conditions which have 
brought in the trust system are not so complex nor so 
occult as many assume. When due allowance has been 
made for the several causative agencies herein named it 
is believed that not much will remain unaccounted for. 

(a) As already conceded the undoubted economic 
tendency of recent years has been toward capitalistic as- 
sociation and co-operation on a large scale in commercial 
and industrial enterprise — within the lines of effective 
competition. There is no occasion for quarreling with 
those who claim that this development is as natural and 
irresistible as was that of the introduction of improved 
machinery and the factory system. An intelligent and 
fair-minded public did not fail to recognize that within 
proper limits this system has brought much of benefit to 
the people, and that when the policy of large manufac- 
turing plants and correspondingly large equipments of 
capital is adopted by one community, it must be adopted 
by others or the latter will lose in the competitive race. 
Accordingly, we became familiar* w r ith the gradual elimi- 
nation of many small, inefficient and ill-placed industrial 
plants and the concentration of production in a smaller 
number of large, but still competing concerns — 
many of which thus reached in magnitude and capital 
the maximum of efficiency in quality and cheapness of 
production. Witnessing this tendency to enlargement 
and the public acquiescence it enjoyed, a few "captains 
of industry'' assisted by sharp-scented financiers behind 
them received a new revelation. Impatient with that 
wholesome business rivalry through which they had them- 
selves reached success, and blindly ignoring the fact that 
between modified but effective competition and indus- 



50 TRUSTS OR COMPETITION? . 

trial monopoly there is a gulf as deep and wide as hu- 
man welfare, they evolved the proposition that this ac- 
cepted method of doing almost everything on a large 
scale could easily be carried further, to what they chose 
to call its "logical conclusion, " so that an entire industry 
should be controlled, if not owned, by one combination 
or interest. Consciously or unconsciously these imper- 
sonal gentlemen thus set as the prize to be sought, a 
series of industrial monopolies in private hands wholly 
unrestrained by law. 

THE GERM OF THE TRUST IDEA. 

Here, in an idea only half worked out, was the egg 
of the modern trust system. The hatching process was 
equally natural. The dazzling advantages of such a revo- 
lution (to those behind the revolution) were apparent 
enough. A willingness to gather great wealth quickly 
was quite sufficient as a motive. There seemed to be no 
occasion to bother about scruples and ethical conun- 
drums for were they not simply assisting a natural 
economic evolution — serving as well-paid midwives at a 
birth which was inevitable without them? The only re- 
maining question was, "Can it be done?" 

(b) A partial affirmative answer seemed to be at 
hand in the overwhelming and sustained success of the 
Standard Oil Trust. True, that concern had started long 
ago under special conditions, when the petroleum indus- 
try was largely a mining venture, had brought order and 
success out of chaos and failure, and had not formally 
taken control of a whole industry. It was still doing 
business against some competition at home and against 
powerful and alert rivalry abroad. But it was known 
to control prices here, both of the crude and refined 
products, and of its enormous profits there was no occa- 
sion to doubt. With aggregate dividends of $91,415,000 
on its stock in the three years ending with 1898, with its 
$100 shares selling at 490, making the value of the busi- 



TEE PROFESSIONAL PROMOTER. 51 

ness over 476 million dollars, it is not surprising that 
the example of the semi-monopoly of the Standard was 
irresistibly seductive to persons who were under tempta- 
tion to go and do likewise in other fields. 

(c) Omitting minor ventures, a group of gentlemen 
formed a plan for consolidating the sugar refining indus- 
try of America* in a single combination. After a few 
false steps the colossal undertaking becamp a substantial 
success. The Sugar Trust began in 1887-9, by absorbing 
twenty independent refiueries, representing over 90 per 
cent of refining capacity in the United States, and sub- 
sequently increased this to 98 per cent. Attacked in the 
courts of New York as an illegal combination in restraint 
of trade, it was dissolved as a trust proper, and reap- 
peared in 1891, as a single corporation of New Jersey, 
capitalized at $73,936,000, one-half preferred stock and 
one-half common. For six years ending with 1898, the 
company (with only a nominal investment of capital out- 
side of that already supplied by its own net earnings) 
paid 7 per cent, dividends on its outstanding preferred 
shares, and an average of 12 per cent, on its outstanding 
common. 

This spectacular success in sugar under the leader- 
ship of the Havemeyers, added to the long record of the 
Standard Oil, almost completed the affirmative answer 
to the question, "Can it be done?" The fabulous profits 
earned by the reorganized Sugar Trust and paid as divi- 
dends on stock which was mainly water, added fuel to the 
zeal of the gentlemen who had their eyes on other indus- 
tries, and the query began to rise in the minds of many 
sagacious and pushing men, some with and some without 
financial connections, Why cannot we duplicate the 
Havemeyer deal on a smaller scale? And in the sunshine 
of events many of these men east and west blossomed 
into professional promoters. 



52 TRUSTS OR COMPETITION? 

METHOD OF TRUST BUILDING. 

(d) The tide of great business prosperity which set 
in after the elections of 1896 furnished a condition with- 
out which there would now be no history of the trust 
movement to write. The conspicuous feature of the 
period, not yet wholly passed, was the marvelous revival 
and overflow of financial confidence, following a long sea- 
son of commercial dry-rot and pessimism. This resulted 
in the unlocking of a vast amount of investment capital, 
whose owners seemed anxious only lest somebody else 
should get before them in obtaining whatever securities 
were offered through respectable banking channels. 
Probably never in the history of any country was an in- 
vesting public so indiscriminatingly omnivorous. This 
fact was instantly recognized by the promoting class as 
assuring success for a long list of "industrial" consolida- 
tions, provided two remaining elements could be counted 
on: First, would leading bankers and trust company offi- 

The American Writing Paper Company consolidated into a trust 
twenty-seven plants, with options on several other smaller ones. Of the 
twenty-seven concerns twenty-four had an aggregate capacity of 250 
tons daily. A leading banking institution of New lork, which had been 
asked to finance the combination, privately learned that the price actually 
to be paid for the sixteen mills around Holyoke and Springfield, Mass., 
having an aggregate daily capacity of 227 tons, was $6,684,000. The capacity 
of the other eight New England mills was only 32 tons per day, leaving 
the three mills in Wisconsin with capacity not stated. All the twenty- 
seven mills cost the promoters not much over $7,000,000, and the former 
owners considered that they were getting fancy prices for their prop- 
erty, or they would not have sold. Their reasonable cash value, includ- 
ing good-will, may possibly have reached $5,000,000. The trust organiza- 
tion was floated with a capitalization of $42,000,000, or more than six 
times the maximum cost at inflated values. The capital of the trust 
was made up of bonds, $17,000,000; preferred stock, $12,500,000; common 
stock, $12,500,000. From the proceeds of bond sales, $2,500,000 was placed 
in the treasury of the corporation as working capital. In their pub- 
lished prospectus (September, 1899) the bankers of the new trust, Lee, 
Higginson & Co., of Boston, after stating that the combination of twenty- 
seven mills represented 84 per cent, of the total production in New Eng- 
land and over 76 per cent, of the entire output of fine writing paper in 
x the United States, said: "The combination of these companies will 
naturally result in extensive advantages, improvements and economies, 
and our best advices from most competent men indicate that* the net 
earnings of the new company will not be less than $2,200,000 (and this 
without increased output), which is equivalent to interest and sinking 
fund of the bonds, seven per cent, dividend on the preferred, and three 
to four per cent, on the common stock." 



METHODS OF THE TRUST BUILDERS. 53 

cials consent to finance the proposed consolidations, by 
first underwriting the several propositions and then mar- 
keting the resulting stocks and bonds with the public? 
Second, would the manufacturers, the real owners of 
existing plants, consent to give up ownership and man- 
agement of their businesses and merge them in a trust? 
Inquiry among bankers promptly developed the fact that 
on a satisfactory basis they w T ere ready for this line of 
business, and that in fact many of them were already^ in- 
terested. Then, with as many different methods of ap- 
proach and as many varying details of result as there are 
industries to consolidate, the promoters, each having first 
made a study of his selected line of manufacture, pro- 
ceeds to lay before manufacturers the glories of the trust 
system, and ascertain their temper towards it — in most 
cases with this general course and outcome: 

(e) Some entire industries wholly refuse to enter- 
tain the project, and in those lines no trusts are formed. 
The promoter's efforts fail. In the others the out-of-date, 
unprofitable and failing concerns — the lame ducks of 
each industry, welcome the suggestion of consolidation 
and are not over-particular as to terms. The modern, 
successful and profit-earping companies are, for the most 
part, either averse to the change or coolly curious to 
know at the outset Iiow far the movement has already 
progressed and what sort of an offer is likely to be made 
to them. With the shining example of the Sugar Trust as 
a text and warrant, the promoters are able to make up 
a prospectus that would interest any manufacturer who 
is mortal. Always, everywhere and foremost is urged 
the overshadowing financial value of the monopoly of 
production and sale, which is to be enjoyed by the trust 
resulting from the proposed consolidation. Without this 
feature of monopoly there would have been no visitation 
by the promoter, no waste of time by the manufacturers, 
and no talk about trusts. In the absence of this noble 
Dane there would have been no economic play of Ham- 



54 TRVSTS OR COMPETITION? 

let. All negotiations are conditioned upon the ability 
of the promoters to get the assent of at least 85 to 90 
per cent, in producing capacity, of manufacturers- — the 
well-grounded theory being that, controlling so large a 
proportion of an industry, the trust, by one of several 
well-known methods, can soon make it for the interest of 
the minority outsiders to come in or retire from business 
— unless it should seem diplomatic to leave in the field a 
few minor independent concerns to continue business on 
sufferance of the trust, keep up a semblance of competi- 
tion and thus hoodwink the public into believing there 
was no monopoly. 

Such liberal terms as to purchase of their plants and 
sometimes as to their own place in the management of 
the future trust, are usually made with certain leading 
manufacturers as will induce them to give the weight 
of their names to the project. Others, influenced by these 
prominent examples, indicate their willingness to come in 
provided terms are right. To those who are still 
reluctant pressure is applied by the significant sugges- 
tion that they will be in a particularly bad fix if the 
trust is formed and they are left on the outside. Finally, 
the problem is reduced to one of making terms of pur- 
chase or absorption satisfactory to each concern form- 
ing part of the industry. 

PLANTS OVERVALUED, CAPITAL INFLATED. 

And just here comes in the most phenomenal feature 
of this entire trust movement. Bearing in mind the fact 
that, with rare exceptions, every man will sell any busi- 
ness property he possesses if a sufficient sum is offered 
for it, the process of consolidating an industry into one 
ownership by purchasing all its factories, becomes a 
simple one provided the purchaser or purchaser's agent 
is not limited as to the price he shall pay. Practically 
this is the amazing situation in most cases when the aver- 
age promoter approaches manufacturers with a view 



SOME EXPERT TESTIMONY. 55 

to starting the organization of a trust Doubtless in 
some instances fairly conservative valuations have been 
placed on the plants of an industry and the resulting 
trusts have been reasonably capitalized. These are be- 
lieved to be a small minority of the whole. Usually even 
when plants are paid for wholly or mainly in cash the 
consideration is far in excess of the real money value, 
simply because the promoter is not buying for himself, 
or for any specific purchaser, is not limited as to price 
to be paid, and needs to have the prompt assent of the 
manufacturers in order to prevent a collapse of the plan 
through simple delay. As all these facts are known to 
the cool-headed manufacturer, he names his own terms, 
accepts his price, and steps out of the business, a capital- 
ist — unless his salaried services have been engaged for 
the new management. 

With the manufacturer who becomes the owner of 
trust stocks or bonds, with the bankers who finance 
these undertakings, and with the investing public which 
buys these securities with both eyes shut, the upper- 
most thought is that the perpetual monopoly, the free- 
dom from competition, will enable the trust to pay satis- 
factory dividends on any capitalization it chooses to 
adopt. 

EXPERT TESTIMONY. 

In proof that this outline of the genesis of the aver- 
age trust is a picture from life, and by way of showing 
how overcapitalization is brought about, note the follow- 
ing frank and voluntary testimony from one who prob- 
ably know T s more about the facts from an inside view 
than any other person. Mr. Jas. B. Dill is a leading cor- 
poration lawyer of New York City, and is also a member 
of the New Jersey Bar. He shared in framing the pres- 
ent New Jersey statute governing the chartering of cor- 
porations for that state, drew the charters for and super- 
vised the organization of half a score of the largest of 
modern industrial corporations, and is a director in nearly 



56 TRUSTS OR COMPETITION? 

all of the former. When in Chicago, attending the re- 
cent conference on trusts and combinations, as a looker- 
on in the interests of the corporations represented by 
him, Mr. Dill gave out a prepared statement, in which, 
after explaining that there are honest trusts reasonably 
capitalized, and dishonest trusts overcapitalized, he used 
this language: 

The evils of these dishonest corporations arise in the methods 
followed by the promoters. Suppose, for instance, some promoter 
conceives the idea of consolidating the plants engaged in a certain 
line of manufacturing. He goes to the owners of the plants and gets 
options. He needs money, so he goes to some bank and lays the op- 
tions before them, with a proposition to finance the combination. 
Say, for example, that the plants are worth $5,000,000. He would de- 
mand $500,000 for his options, and a half of the profits. If the bank 
agrees the promoter goes to the owners of the plants and tells 
them that he can pay them a quarter of their value in cash and the 
remainder in preferred stock, but as a special inducement he offers 
them a like amount of common stock. By this deal the capitalization 
is doubled, and becomes $10,000,000. But this would leave nothing 
for the bank which is financing the deal, so the bank must again 
double the capital in order to give a proper margin. But the stock 
of such a corporation will sell only from 40 to 60 cents on the dollar 
when placed on the market, so another $10,000,000 is added, and 
the capital stock becomes $30,000,000, while tfce actual value is 
$5,000,000. Then the promoter and the bank quietly sell their stock 
for what it will bring, and the corporation is left in the hands of 
the stockholders with immense fixed charges to pay on watered stock. 
Reduction in wages follows, which means a corresponding reduction 
in the quality of the article manufactured, prices are advanced as 
far as possible, and the corporation struggles on until failure and 
reorganization take place after immense losses to stockholders and 
employes. 

Certainly not in five per cent of the trust organiza- 
tions thus far completed has the movement to consoli- 
date and monopolize an industry originated spontane- 
ously with the solvent manufacturers representing such 
industry. With so few exceptions as only to prove the 
rule, an expert promoter or group of promoters, includ- 
ing one or more bankers, has in each instance conceived 
the idea, formed the plan, solicited manufacturers' op- 
tions, plied the arts of diplomacy with the owners of fac- 
tories, framed prospectuses and negotiated with moneyed 
institutions for financing the "deal" and for selling the 
resulting stocks and bonds to the investing public. 



TEE ARGUMENT AGAINST THE TRUST. S? 

THE MEN BEHIND THE TRUST. 

If this freehand sketch of the origin of the monopoly 
trust system, as confirmed by the highest expert testi- 
mony, is substantially accurate, and it will be recognized 
as such by those who are informed on the subject, then 
these conclusions are justified: 

1. The trust system of to-day did not originate with 
the men who alone could have a legitimate interest in 
launching such a movement because it might improve 
and cheapen production — the owners of manufactories. 

2. The four classes of citizens who have contrib- 
uted to the surprising result, the first two actively and 
the last two passively, are shown to be: (1) The promo- 
ters, whose sole motive has been the large commission 
or profits for transient service in bringing about the sev- 
eral consolidations. Not one has or wishes to have any 
interest in the permanent economic questions affecting 
productive industries. (2) Certain eastern bankers, 
whose sole motive has been the still larger profits and 
commissions resulting from capitalizing the trusts and 
selling trust securities to investors who largely rely on 
their judgment and recommendation. Not one of these 
bankers but would smile in private at the suggestion 
that his activity, agency and profits as a trust promoter 
formed part of an "orderly economic evolution." (3) The 
manufacturers, whose motives have varied according to 
their condition. Those in financial distress have wel- 
comed the trust as an escape from bankruptcy. Those 
who were offered twice the value of their plants needed 
no other motive. Those who wished to remain in the busi- 
ness of a lifetime, but apprehended the club of the trust 
if they held out, yielded to their fears and sought conso- 
lation in cash, bonds, stocks and retirement. Those who 
accepted influential positions in the management of trust 
affairs, in addition to other satisfactory terms, required 
no other inducement. Not one manufacturer, so far as 
heard from, considered himself as yielding to an eco- 



58 TRUSTS OR COMPETITION "t 

nomie evolution which relentlessly urged him and his fel- 
lows on to "still larger aggregations of capital, labor and 
effort." (4) Finally the investors, who simply knew that 
they wanted in large amounts securities which leading 
bankers and brokers represented as being both safe and 
profitable; who made no investigation £or themselves as 
to the real assets owned by, or the absurd overcapitaliza- 
tion of, the companies whose bonds and stocks they eag- 
erly absorbed, and who had the vague notion that the 
monopoly advantage of the trusts w T ould offset any de- 
gree of inflation.* 

MONOPOLY-HUNGER, NOT EVOLUTION. 

1. Back of these four classes of ordinary mortals 
whose simple motives are all on the surface, lies this 
fundamental fact: All men have known in all ages that 
in private monopoly, when permitted, there is great and 
quick wealth, but the understanding has hitherto been 
that the law prohibited this unfair advantage of the few 
over the many. Somewhat suddenly the belief has spread 
like contagion in America, based largely on the immunity 
of the Sugar Trust and one or two other pioneers in this 
field, that the American people will tolerate private 
monopoly of the production and sale of necessary com- 
modities — or, rather, that they have no defense against it. 
A hint was sufficient. The only road to such monopoly 
lay through the unification of the several industries, and 
with the signal once given and the method made plain, 
the self-seeking rush followed, as to a new Klondike. 
With such unnatural and incredible inducement, "sur- 
passing the dreams of avarice," on the one side, and 
human nature on the other, no different result w T as pos- 
sible. In this sense the movement is natural. 

2. In the light of these facts it becomes ' manifest 

*A Broad Street broker, with more accuracy than elegance, has char- 
acterized the Men Behind the Trust in the order of activity as the 
Promoters, the Promoter-Bankers, the Quitters and the Suckers. 



TEE DEADLY PARALLEL COLUMN. 59 

that the central and determining element in the trust 
movement, monopoly, is not in any sense nor to any 
extent whatever an economic evolution, an orderly de- 
velopment from preceding conditions under the stress of 
an imperious law which nobody can either understand 
or resist. On the contrary it is shown to be an artificially 
stimulated movement, solely prompted by ordinary, vul- 
gar human motives and enabled to succeed for the 
time partly because of extraordinary investment condi- 
tions in the country, but mainly because of the previous 
neglect of the public to provide adequate legal safeguards 
against forms of private monopoly which, until recently, 
no one suspected would ever attempt to invade popular 
rights. 4t is the offspring of a smug and thrifty philosophy 
of self-seeking on a gigantic scale, masquerading as an in- 
evitable and scientific industrial development. If gross 
intoxication is the scientific, necessary and logical con- 
clusion of the tonic use of wine, then it may be sci- 
entific and inevitable to carry the process of competitive 
industrial development to the stage of systematic and 
universal monopoly — its exact opposite. The tendency 
toward large-scale production in the interest of maxi- 
mum economy and efficiency is a natural evolution and 
right; the rush past that maximum to monopoly for 
monopoly's sake is strictly artificial and wrong. The one 
is sobriety; the other is economic debauch. 

Perhaps the deadly parallel column may illustrate 
this point: 

Fact— Personal liberty, exercised Fact.— Industrial liberty of concen- 
within the lines of law and order, tration held within the lines of 

is beneficial to the individual and maximum efficiency and economy 
to society. at, d of effective competition, is 

beneficial to the individual and to 

society. 
Fallacy.— Therefore, personal lib- - Fallacy.— Therefore, industrial lib- 
erty exercised without regard to erty of concentration carried be- 
law and order and carried to the yond the lines of maximum eflS- 
stage of anarchy, which means ciency and economy and of ef- 
the bondage of all to the forces fective competition to the stage 
of barbarism, is also beneficial to of universal private monopoly, 
the individual and to society. which means industrial bondage 

of the many to the few, is also 

beneficial to the individual and to 

society. 



go trusts or competition t 

TRUSTS IN OTHER COUNTRIES. 

It is urged that the universality of the trust move- 
ment proves its natural and inevitable character, and 
then the statement is made that England rivals America 
in number and magnitude of industrial trusts. This is 
a curious error. Neither in Great Britain nor on the 
continent of Europe is there a state of things correspond- 
ing to what we understand by the trust movement in the 
United States. In Great Britain the facts are these: 
There exists the same general tendency as here toward 
enlargement of plants and capital in the interest of 
greater economy and efficiency in production and this 
is often accomplished by means of consolidating two or 
more previously competing concerns. Both mercantile 
and manufacturing establishments, some of which were 
built up by partnerships running through generations, 
have in recent years been put in corporate form, reason- 
ably capitalized, and their stocks and bonds under the 
name of "industrials" constitute a favorite investment of 
the British people. This class of securities now reaches 
an aggregate amount of more than 400 millions sterling. 
They are in nearly all cases the shares or obligations of 
large, independent establishments engaged in legitimate 
competitive pursuits and bearing no resemblance to 
American monopoly-trusts. In several trades there are 
various forms of association and agreement with a view 
to adjusting supply to demand and preventing what is 
known there, as here, as cut-throat competition. Of this 
class are the trades combinations originated by Mr. E. J. 
Smith, of Birmingham, fully explained in this volume, 
but Mr. Smith appears never to have seen a typical Amer- 
ican trust in England and on information he denounces 
it as monopolistic and injurious. Aside from the Thread 
combination, which is about half American, there is 
scarcely an instance in Great Britain where a successful 
attempt has been made to absorb into a single owner- 
ship and thus monopolize an entire industry on the Amer- 



AS TO TRUSTS IN GREAT BRITAIN. 61 

ican plan. Special investigation confirms the indications 
of current English journalism and if further corrobora- 
tion were needed it is furnished by the following pointed 
letter from one of the best informed gentlemen in Her 
Majesty's foreign service, the British Consul-General at 
New York: 

Her Britannic Majesty's Consulate General. 
New York, Oct. 17, 1899. 

Sir:— With reference to your letter of the 14th inst., it does 
not appear to me that the industrial trust, absorbing the leading in- 
dustries of the country, prevails to any considerable extent in Great 
Britain, at present. Complaints are made from time to time of com- 
binations between railway companies and the owners of shipping 
which lead to a practical monopoly in a particular branch of trans- 
port, and in this way are said to favor the foreign producer, to the 
detriment of native production or industry. But so far as I am 
aware, there has not been in Great Britain the same tendency to 
establish organizations to obtain the ownership or control of all or 
nearly all the plants or factories of a given industry, for the purpose 
of establishing a practical monopoh. 

Yours faithfully, 

PERCY SANDERSON. 
Mr. A. B. Nettleton, Chicago. 

Substantially the same condition prevails in Ger- 
many, where the conversion of private partnerships into 
capitalized industrial corporations, often accompanied 
with the union of two or more, has recently reached a 
speculative stage; but the characteristic feature of the 
American movement, namely, the systematic monopoliz- 
ing of an entire industry by one corporation is only no- 
ticeable by its absence or its rarity. 

There are practically no trusts in Canada, yet the 
Dominion's export trade is advancing by leaps and 
bounds. That is a curious form of natural evolution 
which scrupulously respects political boundary lines — as 
if a Dakota cyclone Should abruptly retire from business 
on reaching the Manitoban border. In reply to a speci- 
fic inquiry the editor of the Toronto Globe, under date of 
October 23, 1899, sends this statement: "There are few 
if any Canadian trusts. In Toronto, there has been a 
local combine of the bicycle industry, but it is scarcely on 
the scale of a trust." [See appendix to this Argument] 



62 TRUSTS OR COMPETITION? 

III. SOME TRUST BENEFITS FICTITIOUS, OTHERS OVERSTATED. 

1. Cheapened Production. — Perhaps the leading 
argument, purely economic in character, in behalf of the 
trust system is that the cost of production is thereby 
largely reduced, with great resulting advantage to pro- 
ducer and consumer. This claim is weakened by a three- 
fold fallacy: (1) There is a well-defined limit beyond 
which no advantage in cost of production results from 
increased size of plant. (2) The average trust is not 
massing production in one or more great, modern estab- 
lishments, but is buying and then maintaining from five 
to forty existing and widely separated plants, represent- 
ing all grades of efficiency and inefficiency; ience it can 
lay no claim to the best economic conditions and results 
in production. (3) Whatever advantage in the form of 
cheapened production results from greater capacity of 
plant is realized by individual establishments of large 
size, adequate capital and competent management, with- 
out any necessity whatever for invoking the trust or 
monopoly feature. On the first point hear Henry Carter 
Adams, professor of political economy in the University 
of Michigan, whose paper presented at the recent trust 
conference in Chicago is given in full in this volume: 

It is common to say that, increase in the size of manufacturing 
plants permits the production of commodities at less cost than would 
otherwise be the case. There is undoubtedly some truth in this 
statement. The development of machinery has gone hand in hand 
with the growth of factories, and as a result the product is furnished 
at a cheapened rate. But there is a limit to the application of this 
rule. Every manufacturing industry, considered from the point of 
view of production, has at any particular time a size which may be 
regarded as its normal size of maximum efficiency, This normal of 
maximum efficiency is determined by the extent to which division of 
labor and the use of machinery can be applied. To increase such an 
industry by one-half would not result in a decrease of the cost of 
manufacture, for it would occasion a less effective application of the 
principle of division of labor. 

While, therefore, it is true that the concentration of capital and 
labor under a single direction is followed by economy up to a certain 
point it is not true that combination and concentration beyond that 
point tend to reduce the cost of production. He who accepts this 
statement of the case must conclude that manufacturing combina- 



LIMIT OF ECONOMY IN PRODUCTION. 63 

tions, I say nothing of other forms, contribute nothing to the reduction 
of the cost of manufacture beyond what would be contributed should 
each of the industries continue its independent competitive existence. 
This is a curt answer to a profound question, but it is believed to rest 
upon sound analysis and to lead to the conclusion that the motive to 
a trust organization of manufacturing industries is not found in a 
desire to benefit the public by the reduction of cost. 

This broad statement of a permanent economic prin- 
ciple is concurred in by most authorities and is con- 
firmed by the actual experience of manufacturers. To 
repeat: The maximum of advantage resulting from 
great aggregations of workmen, machinery and capital 
in a manufacturing industry, so far as concerns cost of 
production, is reached in those individual establishments 
which have (1) sufficient size, (2) competent management, 
(3) adequate capital. To a plant of this character the 
trust system can bring no advantage whatever in the way 
of reducing cost of output. On the contrary, by merging 
such a concern under the trust system in a mob of scat- 
tered establishments of good, bad and indifferent char- 
acter and management, the result is more likely to be 
the reverse of that claimed by trust advocates. As an 
illustration, take the Baldwin Locomotive Works of Phil- 
adelphia, whose engines go in numbers to China, Japan, 
Russia, and even to England. It would provoke a smile to 
suggest that their cost of production and hence their abil- 
ity to capture foreign markets and "meet and vanquish" 
the competition of European locomotive-builders would 
be improved by entering a trust. The trusts cannot sud- 
denly dismantle most of the plants they buy, and then 
concentrate production in a number of colossal and mod- 
ern establishments in which the best conditions may be 
secured. Such a course would involve a sacrifice of as- 
sets and good-will that would be prohibitive. But without 
pursuing such a policy the trust is obliged to do the best 
it can with the plants it takes over, and it cannot get 
from such a situation anything like the maximum of effi- 
ciency and economy. Several scores of promising trusts 



64 TRUSTS OR COMPETITIONt 

are likely to encounter this economic disillusionment 
before the new century is out of swaddling clothes. 

2. REDUCED COST OP MARKETING PRODUCT. 

The advantages claimed under this head are not 
groundless in relation to most industries, but they have 
been pretty uniformly overstated to investors and the 
general public. Two leading elements in the former 
cost of marketing manufactured commodities have been 
advertising and the employment of traveling men. Be- 
yond doubt some saving can be made in these particulars, 
chiefly by avoiding the duplication of selling effort for 
the same class of goods in the same field. But to what- 
ever extent the trust-organizers have counted on prac- 
tically cancelling expenditure for these two items, on 
the ground that buyers will be obliged to come to the 
sole manufacturers, they are likely to be surprised. 
Those trusts that have tried this experiment have dis- 
covered that demand for commodities falls off with re- 
markable rapidity as soon as effort in pushing sales is 
materially reduced. To an extent which few appreciate, 
the buying public has become accustomed to being re-, 
minded of its needs before making purchases. The coun- 
try merchant often has more inertia than enterprise, and 
with the periodical visits of his favorite drummer dis- 
continued, his orders dwindle or are delayed until un- 
seasonable. Except in staple and absolutely necessary 
commodities, demand is largely created and maintained 
by advertising through periodicals, catalogues or travel- 
ing salesmen. Hence, the trust that expects to save the 
bulk of this important item must also expect to lose 
through diminished sales more than the economy repre- 
sents. This is not theory, but the testimony of leading 
dealers in many lines. A further fact must be reckoned 
with, at least until the public has received a new revela- 
tion, and that is that the deep seated prejudice against 
trusts as unfair monopolies will tend to diminish the 



TRUSTS AND OUR FOREIGN TRADE. 65 

consumption of trust-made goods. Increased effort, cost- 
ing money, will be needed to counteract or compensate 
for this drawback. 

3. ENLARGING OUR FOREIGN TRADE. 

The trust argument on this point is weak, both on 
its economic and its ethical side. The claim persistently 
made that monopoly-trusts are a necessary means for 
enabling American producers to meet foreign competi- 
tion in foreign markets and that an enormous proportion 
of the recent increase in American exports of manufac- 
tured goods has been accomplished by these organiza- 
tions and mainly because of their trust character is 
simply fallacious. e On the contrary, the maximum of 
efficiency and usefulness in these directions has been 
reached by those great independent establishments 
which have no alliance with or sympathy for the mo- 
nopoly-trust method of doing business. It is only neces- 
sary to refer to a few of the concerns which are doing 
more than all the trusts combined to market American 
products abroad, such as the Pillsbury- Washburn Mill- 
ing Company of Minneapolis, whose exports of flour 
nearly equal those of all other American mills together, 
and whose controlling managers have flatly refused all 
the blandishments of the trust promoters. As to others, 
we cannot do better than quote the following letter from 
one of the editors of the Philadelphia Evening Tele- 
graph : 

Philadelphia, October 4, 1899. 
Dear Gen. Nettleton :— In reply to your letter of the 29th ult., 
permit me to say that none of the great industrial establishments 
in Philadelphia engaged in contracts for foreign countries are 
connected with trust organizations, unless the shipments of the 
Standard Oil Company from this port be credited to that account. 
The Baldwin Locomotive Works, whose engines now go to nearly 
all parts of the globe, is simply a joint stock concern, standing 
alone, with no entangling alliance. The Cramp Ship and Engine 
Building Company, with $9,000,000 of foreign contracts now on 
hand, is similarly independent. The Disston Saw Works, whose 



66 TRUSTS OR COMPETITION? 

annual trade of $10,000,000 is largely foreign, has no connection 
with any other house, being owned and controlled by the Disston 
family. The Pencoyd Iron Works, builders of the great Atbara 
bridge, in the Soudan, for the English government and in com- 
petition with the bridge-building firms of Great Britain, ia 
so far absolutely alone. Trusts do not flourish in this town. 

Yours truly, 

JOHN V. SEARS. 

Of course, a part of our increase of exports has natu- 
rally come from trust organizations, but, as is seen, much 
more has come from those large individual establish- 
ments which have no taint whatever of the monopoly 
element about them. The much-quoted agency of the 
Standard Oil Trust in swelling ouf foreign trade has 
little bearing on the present controversy. That concern, 
by reason of its pipe-line, tank and transportation sys- 
tems, has become practically a natural monopoly, like a 
railway, and is in several other respects wholly differen- 
tiated from the latter-day trusts now on trial before the 
country and which usually have no such excuse for being. 
In a word, great corporations or firms, having adequate 
capital and modern plants and management, yet having 
no affiliation with any trust and no itch for monopolistic 
power, can do and are doing for our foreign trade all 
and more than the trust can legitimately accomplish. 

Second, the ethical side. If, as claimed, in order to 
"vanquish" foreign manufacturers by underselling them 
in their home markets, thus driving them to the wall and 
bringing distress to whole communities of our neighbors 
over sea, it is necessary to subject our own industries to 
bondage and build up an unfair competition abroad on 
an unfair monopoly at home, then the result is not worth 
the price. Every manly community, domestic and for- 
eign, will expect to face fair competition and take the 
consequences, but an American monopoly trust, if it 
possesses the advantages it claims, is playing the com- 
petitive game with loaded dice. 



THE ARGUMENT AGAINST THE TRUST. 67 

IV. EFFECT ON TOWNS, FARMS AND LABOR. 

Even if in every other respect the justification of the 
trust were complete and triumphant, the natural and 
necessary effect of that system on the villages, towns and 
smaller cities and on the farm life of this country would 
compel its condemnation. It is not necessary to draw an 
imaginary picture of dismantled factories, idle workmen, 
grass-grown streets and weed-grown farms. It is suffi- 
cient to apply common knowledge and common sense 
to the problem and accept the results, be they favorable 
or unfavorable to any theory. 

Authorities estimate that with no check to present 
tendencies, within the first quarter of the twentieth 
century one-half our population will be living in towns of 
more than 5,000 people. Of those engaged in farming a 
very large proportion will then more than ever be de- 
pendent for their income and prosperity upon their 
proximity to these groups and centers of population. The 
absolutely vital importance to the entire republic of a 
continuance of fairly favorable conditions for our town 
populations everywhere, becomes too plain for debate. 
It is fair to assume that the trust system, unless checked 
by law, will absorb what few manufacturing industries 
are still outstanding and of sufficient importance to at- 
tract the attention of the professional promoter. What, 
then, may our towns and minor cities reasonably expect 
under the new conditions? 

THE TOWN AND THE FACTORY. 

(1) Practically no new manufacturing plant can be 
started in any town at the initiative of its citizens in a 
line of industry which is controlled by a trust. The full 
meaning of this tremendous fact cannot be sensed with- 
out recalling the process by which the average town and 
city have been founded, fostered and developed. In 
nearly all cases where any considerable growth has been 



68 TRUSTS OR COMPETITION? 

reached, the local factory has been the nucleus around 
which much of that growth has centered. To secure, one 
after another, additional manufacturing plants has been 
the abiding and never-sleeping ambition of every Ameri- 
can town worthy of a place on the map, and the struggles 
entered upon and the repeated sacrifices made by all 
classes to achieve this end are evidence, both of the 
civic enterprise of the people and of the over-shadowing 
importance attached by them to the building up at home 
of thriving and permanent manufacturing industries. 
This process of promoting urban growth by encouraging 
the starting of new factories and local industries has 
continued up to the present time, rivalry between adja- 
cent towns in this respect often becoming the chief ex- 
citement of the community. It may be broadly stated 
that the thrift and importance of our towns have been 
in proportion to their success in starting or attracting 
and retaining manufacturing plants, and the future can 
be judged by the past. The fact is sufficiently startling 
that the citizens of a town are henceforth virtually pre- 
cluded from themselves starting a new factory in any 
important industry. But this sharp and ominous dis- 
ability will be partially compensated for if the trusts can 
be relied on to do in future what local enterprise has 
done in the past. Let us see: 

(2) If any existing trust were now organizing and 
starting its particular industry from the foundation it 
certainly would not scatter that industry in a score of 
plants throughout a dozen states. If the industry is to 
have one ownership and one management then such an 
aimless distribution is unnatural and uneconomic. Some 
exceptions to this rule would suggest themselves where 
bulky raw material partially governs factory location, 
but for the most part the foregoing statement is obviously 
true. 



EFFECT OX COVXTRY TOXVXS. 69 

CONCENTRATION AND EASTWARD MOVEMENT OF FACTORIES. 

(3) Almost uniformly the trusts are owned and 
controlled east of the Alleghenies. Their managers live 
there. From the moment that a trust takes over a unified 
industry a process of natural selection begins and pro- 
ceeds, not perhaps from any definite previous purpose, 
but inevitably. The mere fact of centralized ownership 
will naturally lead each trust gradually to concentrate 
its manufacturing activity within geographical limits 
easily accessible from the headquarters of the trust. 
When it becomes necessary or expedient to close or dis- 
mantle one of several factories belonging to a trust, other 
things being equal one will be selected for sacrifice most 
remote from the center of operations. When there is 
occasion to build new factories or enlarge existing ones 
this increase of capacity will also quite as naturally 
take place within a moderate radius of the central office. 
When a factory at a distance from the trust's headquar- 
ters is destroyed by fire or otherwise, it will be rebuilt, 
if at all, as part of the central group, and not in the town 
where formerly situated. This tendency will be acceler- 
ated by two important and perhaps valid considerations: 
First, public sentiment toward trusts in the West and 
South, and indeed, in country districts generally, is such 
that trust owners would rather have their plants and 
other assets nearer home. Second, the immediate vicin- 
ity of a great financial and industrial center with its 
abundant banking and transportation facilities, its labor 
supply and its opportunities for personal conference be- 
tween managers of departments and of different but 
affiliated or friendly trusts must have strong attractions 
for these great industrial aggregations. Not that a great 
city is itself an inviting field for large manufacturing 
plants. Rents and taxation are too high for this. But 
the hamlets just outside the corporate limits of a metrop- 
olis furnish almost ideal manufacturing conditions. 



70 TRUSTS OR COMPETITION? 

Rents, taxation and the cost of living are relatively low, 
while transportation facilities and freight tariffs are usu- 
ally the same as for the city itself, and with fast subur- 
ban trains and the telephone all the advantages of the 
city will be enjoyed, coupled with about all the well- 
known advantages of the country town as a manufactur- 
ing site. The element of bonuses, partial exemption from 
taxation, and other local aids which towns in their strug- 
gle for existence have hitherto employed as a means of 
influencing the location of new manufacturing plants 
will naturally have little, if any, influence with the trusf, 
particularly when weighed against the benefits of geog- 
raphical centralization. Whatever exceptions may occur 
to this rule, the broad statement is certainly incontro- 
vertible that a trust owned at the East will not scatter 
new factories throughout the Central, Western and 
Southern states. 

If this diagnosis is correct, and it can scarcely be 
otherwise unless human nature has changed with the 
coming of the trust, then not only will a stop be put to 
the erection of important new factories at points distant 
from great centers of population or of established indus- 
tries, but by a steady process of elimination, already be- 
gun, a large part of the manufacturing activity now dis- 
tributed among thriving towns will be transferred east- 
ward, or to the environs of the greatest cities more cen- 
trally located. And one leading interest in a place can- 
not be greatly crippled without all other interests suffer- 
ing correspondingly. To what extent this blight of 
American towns will be realized, every citizen, knowing 
the underlying facts and fairly familiar with the out- 
working of self-interest, will judge for himself. 

TRUSTS AND THE FARMER-THE NEW SECTIONALISM. 

As to the interests of the farmer, more specifically: 
As already suggested, the farmers who live within a 
moderate radius from thrifty towns have hitherto de- 



TEE INTERESTS OF THE FARMER. 71 

pended upon such near-by centers as their only market 
for selling such farm products as will not bear shipment 
a considerable distance; for example, hay, straw, coarse 
and quickly perishable vegetables, fire wood, dairy prod- 
ucts, etc. To whatever extent the towns are depopulated 
or industrially depressed, to that extent this important 
element of prosperity for the farmer is destroyed or 
impaired. This interest does not appear in census re- 
ports, and is scarcely susceptible of being treated statis- 
tically, but anyone who is at all conversant with our 
average farm life will give it great weight. The political 
gospel of a protective tariff has largely obtained its wide 
and continuing acceptance in the North and West be- 
cause it has magnified and emphasized the importance 
of a home market, illustrated by the picture of the fac- 
tory near the raw material, the industrial village near 
the farm, with mutual interchange of benefits between 
the two. What becomes of this theory under the reign 
of the trust? 

But the fundamental wrong visited upon the Ameri- 
can farmer by the trust system is this: The farmer pro- 
duces and sells raw material. He is rightly interested in 
selling his product at the highest price and buying his 
commodities at the lowest price that fair and natural 
economic conditions will warrant. The trust system 
brings in unfair and uneconomic market conditions in 
both directions. All authorities agree to the soundness 
of this double proposition: When all buyers combine, 
or there is but one buyer, and sellers compete, the sell- 
ers get the lowest possible price for what they sell. When 
all sellers combine, or there is but one seller, and buyers 
compete, buyers pay the highest possible price for what 
they buy. 

Apply this to the case of the trust and the farmer. 
For practical purposes the monopoly-trust is the only 
buyer of raw material for its particular line ol industry, 
while farmers always and unavoidably compete with 



•72 TRUSTS OR COMPETITION? 

each other in selling — hence, the lowest possible price 
is received by the farmer. On the other hand, in the na- 
ture of the case the trust is the only seller of the manufac- 
tured article in its line, while all farmers and other con- 
sumers compete in buying; result, the highest possible 
price is paid by the farmer for what he buys of trust- 
made goods. The effect of this economic law can only be 
modified in the present case by supposing that the trusts 
will be able to cheapen cost of manufacturing their wares 
and then will benevolently sell them to consumers 
at prices as low as would have prevailed under open com- 
petition. There is no warrant whatever for believing or 
expecting that this supposition will be realized. The only 
qualifying factor will be the very moderate effect of for- 
eign competition carried on in spite of the tariff. 

It is useless to blink the patent fact that the present 
trust movement, and particularly the phase of it affecting 
the welfare of farms and towns and the open door of op- 
portunity for young men, cannot fail to revive and in- 
tensify sectional prejudice against the East. No matter 
how illogical and unfair this may seem, the fact has to 
be reckoned with by any citizen who really tries to be 
candid with himself and with the problem in hand. It 
would be disastrous if the closing of one gulf of section- 
alism should be followed by the opening of another. 

LABOR AND THE TRUSTS. 

If the reasoning from known facts in previous por- 
tions of this argument is sound then wage earners as a 
class, particularly in the central, western and southern 
states, cannot fail to be injuriously affected by the new 
monopoly system. There is no disposition to magnify this 
feature, nor even to dwell upon it unduly, but whatever 
conclusions are clearly indicated by undisputed condi- 
tions and tendencies should not be timidly avoided. If 
the colossal mistake embodied in the trust system is to 
be corrected the co-operation of workingmen is impor- 



TRUSTS AND THE WOREINGMAN. 73 

tant to that end and they cannot become too intelligent 
regarding it. They will form their own opinions of the 
considerations here presented, for they have acquired the 
habit of doing their own thinking and those considera- 
tions have only so much of authority as they have of 
reasonableness. 

Such, then, is the solidarity of our modern life that 
serious misfortune or derangement cannot overtake the 
community without distributing its unhappy effects 
among all classes. If the monopoly-trust system is in 
fact a fundamental and far-reaching w r rong to society, 
workingmen will be among the earliest and severest suf- 
ferers from that wrong, for they have less of a barrier 
between themselves and economic harm than any other 
class. They usually have no buffer of accumulated means 
with which to soften the impact of disaster. Dislodge- 
ment or grave derangement in the field of employment 
finds them, as a rule, with no resources to fall back upon, 
no plank between themselves and the sea. The considera- 
tions already presented under the head of "Effects on 
Towns and Farms" would seem to apply with almost 
equal force to labor. Any economic policy which can 
have the effect — w T hich puts it into the pow 7 er of any set 
of men to produce the effect — there suggested on the 
manufacturing interests of practically all towns, cannot 
be other than disastrous to the w T orkingmen whose homes 
and employments are in those towns. It is not necessary 
to assume that in those factories that shall finally be 
maintained by the trusts w 7 ages will be seriously cut 
or unusual despotism practiced. There seems to be no 
good reason to expect such results, although, as Mr. Dill 
suggests, many of the overcapitalized trusts will need to 
save in wages account as well as everywhere else in order 
to pay dividends on fictitious securities. The labor 
unions can perhaps be trusted to look after this. Many 
believe there is more reason to expect alliances between 
the trusts and their workmen, along the line of the Smith 



74 TRUSTS OR COMPETITION* 

associations in England. Still the fact has weight that 
when one corporation is the only employer of labor in a 
given industry it has tremendous squeezing power over 
the wage-earners if it chooses to exert it. But it is in the 
cessation of factory building in the great agricultural 
states and in the progressive massing of manufacturing 
industries in eastern and central locations that the 
gravest danger to workingmen is to be looked for. The 
dismantling of a western factory^ can be accomplished 
by a telegram. It takes longer for the discharged work- 
man and his househdid to adjust themselves to the new 
emergency. 

There is another peril, and it is suggested by the 
actual policy of at least one notable trust, which is old 
enough to have developed its permanent course. We 
refer to the lowering of the class and type of workmen 
to be employed by the mammoth new concerns — the 
degradation of American labor and citizenship. Natur- 
ally one would look to the great industries of America as 
the fit field in which intelligent American artisans are 
to earn the living and culture of themselves and their 
families. But if with the coming of the monopoly-trust 
and an enlarged foreign trade the only consideration is 
to be the lowest possible cost of production on the largest 
possible scale, it is not unlikely we may see "wealth ac- 
cumulate but men decay." Mr. Havemeyer, of the Sugar 
Trust, in his testimony before the Industrial Commission 
in August, 1899, said that five sugar refineries were now 
doing the work formerly accomplished by eighteen, and 
that the trust employs about 25,000 men, "mostly Poles 
and Bohemians, because cheaper." On the same occasion 
Mr. Havemeyer finished this attractive picture with this 
master touch: "I don't care two cents for your ethics — 
Fm in this for business." To what extent will it seem 
expedient to other trusts than Mr. Havemeyer's to con- 
centrate their manufacturing capacity in four or five 
great plants on the Atlantic seaboard and then man them 



THE YOVNO MAN AXD THE TRUST. 75 

with low-grade and easily imported European labor, 
"mostly Poles and Bohemians, because cheaper?" The 
open door of opportunity is quite as important to the 
American workman, his son and his daughter, as it is to 
any other class. 

V. THE DOOR OF OPPORTUNITY. 

At the time of its first utterance a great and reas- 
suring truth was embodied in the expression, ''The Re- 
public is Opportunity." To an extent that approaches 
the calamitous the meaning in that phrase is threatened 
with impairment by the pending revolution. A large sec- 
tion of the generation of young men now facing the 
twentieth century will find themselves disinherited of op- 
portunity if the trust system succeeds in establishing 
its principle of private monopoly, and in holding the do- 
main it has seized. Our Western frontier has now 
reached the Pacific: our habitable lands are practically 
occupied, or appropriated, our great special resources 
are being exploited by corporate agencies. By the in- 
evitable changes resulting from settling a continent 
many of the avenues to independent pursuits, which 
were open to the youth of thirty and fifty years ago, are 
closed to the youth of to-day. All the more important 
and indispensable, therefore, were those remaining 
channels of activity which, instead of being closed by the 
country's development, had been broadened and multi- 
plied—namely, the nation's diversified industries and the 
honorable pursuits allied to them. To these an ever-in- 
creasing number of our young men looked for a chance 
in life, and an ultimate satisfactorv career. The trust 



The effect of overcapitalization in the first place is. to do exactly what 
has been claimed by the labor men. Because of overcapitalization the 
companies have got to report to artificial means to pay dividends and so 
are compelled to put prices up and put wages down. Every director takes 
pride in the fact that his company pays dividends, and to pay dividends 
on inflated capital they have got to take money from some place from 
which they ought not to take it— from consumers through high prices and 
from labor through lowered wages.— James B. Dill, addressing the Chi- 
cago Trust Conference. 



?6 TRUSTS OR COMPETITlONt 






system in its logical result shuts this door of opportunity 
in the faces of our sons. 

It is replied that as many persons as ever will be 
required to man an industry under the new system. 
Yes, as permanent wage-earners and clerks, not as ambi- 
tious employes, who may reasonably aspire to become 
employers and associate proprietors. It is further said 
that a young fellow who has it in him to rise will find his 
way upward, that the meritorious will make an oppor- 
tunity for themselves. But a chief indictment of the 
trust system and principle is that they take away the 
opportunity for making an opportunity. A foothold is 
necessary to one who* would lift himself. The foothold 
has been removed in a wide part of the field. What 
promising young man is ever again heard of after he has 

"The present situation, to the good citizen, the good Republican, and 
the man who loves his country, is really alarming, and it is more largely 
owing to the rapid formation of what are called trusts than to any other 
agency. This trust craze has changed the whole nature of doing things." 

Thus spoke to-day ex-United States Senator William D. Washburn of 
Minnesota, head of the extensive flour milling interests in Minneapolis, 
in an interview with a New York Tribune reporter, Mr. Washfburn sig- 
nificantly added. 

"When I was a young man— I am now 68— I had the world before me, 
and there was absolutely a fair field for me. Take all of our most suc- 
cessful business men of to-day and their experiences were like mine. 
They entered the race without a handicap, and their grit and capacity 
won. Now this building up of trusts puts a stop to fair and equal op- 
portunities for the young men of to-day. The young man just out of 
college has no opening, as a rule. He cannot begin business on his own 
account against organized capital. He must join the procession. He must 
content himself with being a mere clerk, and the chances are that he will 
never get any further, because there are so many in his class. This 
makes the situation a serious one, and I am sorry for the young man of 
to-day. I've studied the situation and I'm sure of what I am saying."— 
Chicago Times-Herald, Sept. 11, 1899, p. 5. 

On the other hand Professor Gunton takes an optimistic view of the 
opportunities of young men under the reign of the trust. In his magazine 
for October, 1899, he says in this regard: 

The empty-handed country youth comes to the city for his opportunity. 
He can do nothing at home; get nowhere. He becomes a clerk or opera- 
tive in the employ of a corporation. He can study, prepare himself, ob- 
serve his surroundings and chances, and lay up money. Gradually such 
an one wins promotion, or if he finds some different and special bent and 
has it in him to rise, he will and does strike out and succeed. If he lacks 
any particular force or genius, his clerkship is the best place for him. 
The world is not closed to talent; it is urgently demanding it, and the 
only real complaint that holds good is the scarcity of exceptional merit. 



THE DOOR OF OPPORTUNITY. 77 

entered the comfortable employ of the Standard Oil^ 
Trust? He is bottled up. 

The fact should not be omitted (though the abuse is 
not peculiar to the trust system, except in extent), that 
in most of these great aggregations, where because of 
mere size the real managers cannot be in personal touch ' 
with many employes, a special and vicious form of 
nepotism arid favoritism prevails in the matter of getting 
positions. It first includes the sons in-law and nephews 
of leading owners and officials, then the social cronies of 
these, and finally an outer circle, comprising the cronies 
of the cronies. It is sometimes not an easy matter for 
even a brainy and forceful young fellow, if he have 
neither a "push" nor a "pull," to break through this triple 
line. Of course, all grades of efficiency are represented 
by these semi-fa vorities, and it is fair to say that, in most 
instances, when once employed they find their level by 
merit, or demerit, and the fittest survive. 

What is herein said, concerning the probable effect 
of the trust movement on American towns and farms, ap- 
plies with special force to this matter of opportunities 
for young men. The country town, minor city and the ad- 
jacent farm are the usual starting places for the men who 
subsequently lead events in the metropolis. They are 
the nurseries of forceful character. Leaders of men are 
seldom born and reared in large cities. What hereafter 
will be the opportunities of aspiring lads, reared in and 
near the average country town? It is already a common 
remark with business and professional men who them- 
selves succeeded under conditions now fast passing away, 
"I am wholly at a loss what to advise my son to do." 
To what extent our new 7 tropical possessions may open 
new avenues,, at the cost of exile, remains to be seen. 

And this closing of avenues to honorable business 
careers is scarcely the most serious consideration under 
this head. Unless the leopard is to change his spots and 
human nature suddenly become regenerate, the trust and 



78 > TRUSTS OR COMPETITION? 

the associated trusts will have a final word to say as to 
the political career of any rising young man who prom- 
ises to have aggressive influence in civic affairs. Their 
heavy, though often invisible, hand will be everywhere 
present in political events. As Senator Chandler says in 
his letter, given elsewhere in this book, "No young man 
can rise in his political party, become a local party leader 
or aspire to public office until he has given the trusts to 
understand that he will not seriously exert himself to 
harm them." The spectacle of the Sugar Trust in the 
United States Senate is grim advance confirmation of 
this prediction. 

In a word, so far as lies in the trusts with their 
scores of industries absorbed and more in waiting, and 
their billions of capitalization, it is no longer true that 
"The Republic is Opportunity." 

COMPETITION— ACTUAL, POTENTIAL AND SPURIOUS. 

After the champions of the trust have been led to 
understand that the only trusts which the people are 
talking about are the monopoly-trusts, and not at all 
those "large corporations," which are engaged in a legiti- 
mate competitive business, they proceed to defend private 
monopolies on the ground that their self-interest and 
safety will lead and compel them to sell to consumers 
at prices reasonably low so as not, by a show of high 
profits, to tempt outside capital and skill to start com- 
peting plants. This desire of outsiders to break into the 
preserve of the industrial monopoly is called potential 
competition, and it is admitted that, in the absence of 
laws which do not now exist, this will be the only barrier 
to protect the people against excessive prices and other 
abuses at the hands of the trusts. 

What sufficient force is there in this argument? 

It is evident to all without consulting the political 
economists that where there is a constant and imminent 
probability of new competitors springing up in case ex- 



AS TO POTENTIAL COMPETITION. 79 

isting manufacturers fix and hold their prices at too 
high a level, this fact has some deterrent effect on the 
latter, and hence furnishes some protection to the public 
in case of virtual monopoly of any industry. This 
is all that can safely be admitted. On the other 
hand, in no case can this protection be such as to make a 
permanent private monopoly either safe or tolerable. 
In a majority of instances causes to be named will prevent 
this element from having any considerable protective ef- 
fect within limits that would make it of material value to 
consumers. In normal circumstances, when social and 
economic forces have proper play, potential competition 
is an important factor; but under the artificial and anoma- 
lous conditions of the monopoly-trust tolerated by law, 
that factor disappears or loses most of its vigor. Society 
has had absolutely no experience with a condition of 
things resembling that which) w T ill prevail as soon as the 
new monopoly system feels itself safe in the saddle; and 
in regard to this matter of potential competition econo- 
mists are probably too optimistic in attempting to apply 
to this new situation the maxims and knowledge of the 
past. 

When once an entire business has been absorbed by 
a single interest, it requires either great courage or much 
foolhardiness to attempt to make head competitively 
against it. Capital, if not timid, is usually conservative, 
and does not covet the uncertain task of trying to start a 
new T business in face of a powerful monopoly controlling 
or at least occupying all the avenues of trade. It is par- 
ticularly hazardous and difficult (a) when the enterprise 
requires large capital, as will be the case in contending 
with any modern monopoly trust; (b) when the business 
itself is one involving considerable risk; (c) when 
elaborate equipment is required which is slow 
and costly of construction; (d) when highly 
trained experts are required. After the trust has been 
running long enough it will have in its employ about all 



80 TRUSTS OR COMPETITION? 

the available and satisfactory talent of this sort, (e) 
When the trust business is in one or more important par- 
ticulars protected by patents or trade-marks, and this is 
very frequently the case where a trust has gathered in 
all the plants of an industry. 

THE GIANT AND HIS CLUB. 

Thus far we have enumerated only those obstacles 
to new competition which naturally arise in the course of 
business events, and are largely negative or passive in 
their, nature. It remains to mention the principal and 
most conclusive obstruction in the path of the would-be 
competitor of a trust, namely, the aggressive, unscrupu- 
lous and remorseless campaign of the trust management 
to circumvent, defeat and destroy any real competitor who 
shows his head. 

Discriminating railroad rates alone would go far to 
prevent new competition. In this and other methods of 
warfare the rule of commercial morality likely to govern 
the average trust is sufficiently illustrated in the outline' 
of the Standard Oil episode at Marietta, given elsewhere 
herein. The weapon of discriminating prices is not less 
effective than that of discriminating railroad charges and 
scarcely less unfair when practiced by an unfair mo- 
nopoly. When the trust, doing business throughout the 
whole country, can sell goods below cost in the relatively 
local field of any rising competitor, while itself making 
profits everywhere else, competition is next to impossible. 

Then, after a monopoly-trust, by all means at its com- 
mand, has driven and kept competition from the field for 
a considerable time, possible competitors are apt to lose 
all interest and alertness, go about other business and, to- 
gether with the general public, settle down to the conclu- 
sion that the trust is permanently in the saddle and that 
any further thought of competing is idle. , Or, if per- 
chance a competitor, by reason of strength, becomes for- 
midable after years of battling, it will usually be only a 



TEE GIANT AND HIS CLUB. 81 

question of price for the trust to absorb the new rival, 
and then will follow more years of monopoly and — 
peace! In fact, this whole argumentative fog of potential 
competition can best be illuminated by 

AN ECONOMIC PARABLE. 

A plentiful Orchard fairly belonged to all the People 
and they had been accustomed to gather the Fruit. One 
morning in Harvest time when the People approached 
the Gate a new Giant with a huge Club obstructed the 
Entrance, while his healthy Children busily plucked the 
fine Apples within and kindly offered them for Sale to 
the People outside at the cut Price of one Shilling per- 
Ap'ple. On being remonstrated with by the waiting Peo- 
ple and charged with being a Monopolist, the Giant, with 
winsome Candor, replied: "Indeed, I and my Family 
are no Monopolists; we are ourselves much harassed by 
Potential Competition, since you are all quite free to 
enter the Orchard and compete — if — you — can — get — 
past — this— club — of mine." 

Let us again remind ourselves that the legal right to 
compete has little economic value or restraining effect 
if the power to compete is lacking. 

FICTITIOUS AND TOLERATED COMPETITORS. 

It is a favorite and often fairly effective device of 
some virtual monopolies to leave in operation a few minor 
independent concerns. This is supposed to accomplish a 
double purpose. By an appearance of actual competition 
it serves to delude and pacify the public by concealing 
the fact of substantial monopoly, to temper the general 
criticism encountered by all monopolies and to discour- 
age those on the outside who are looking for business 
openings and w T ho might become real competitors. No- 

The Tin Plate Trust is said to have contracted for a. term of years for the 
entire output of machinery in that line in the U. S. and thus to have forestalled 
any would-be competitor who might be tempted by the present exorbitant 
profits. The officers of the trust state that this is not the case. 

6 



82 TRUSTS OR COMPETITION? 

body enjoys doing business in. an atmosphere of intense 
public odium. So desirable is this semblance of com- 
petition, especially when competitive bids are called for 
at lettings of contracts, that "dummy" competing com- 
panies are sometimes organized and maintained by the 
monopoly company. Accordingly the average trust or- 
ganizer rather prefers to have from five to fifteen per 
cent of the weaker plants representing his industry left 
unabsorbed by the trust, and this is commonly done. 
Result: The trust points to them and says, "Observe 
that we are not only held down to low prices and good 
behavior by potential competition, but behold, the actual 
competition is on our backs." Meanwhile the trust 
quietly establishes a protectorate over its harmless com- 
petitors and tacitly agrees to tolerate their survival so 
long as they refrain from cutting prices and enlarging 
capacity. The Standard Oil now refines 82.3 per cent 
of American petroleum, whereas in 1889 it refined but 75 
per cent. It may well prefer, for appearance's sake that 
the few remaining independent refineries should continue 
in business, and doubtless shapes its policy to this end, 
although it could close them up in ninety days. 

A SYSTEM OF UNIVERSAL PRIVATE MONOPOLY. 

We cannot permit the system of private monopoly 
as embodied in the trusts, to survive and prosper unless 
we are prepared to see that system invade every field of 
human activity where it can be made profitable. If ac- 
cepted at all it is accepted wholly. It involves a change 
of the principle governing the business relations of all 
men — not simply the relations between certain corpora- 

The contention that the trust system will tend gradually to concen- 
trate factories in the East or in the vicinity of great cities centrally 
located needs to be construed in the light of the obvious fact that in the 
case of heavy goods the matter of freight charges will permanently com- 
pel some distribution of plants between the East and the West. But this 
fact will not prevent the progressive removal of plants from country 
towns and the smaller 'cities to the environs of the largest cities in the 
same general section. 



A BLACKSMITHS' TRUST. X'A 

tions and the public. The law cannot allow the giant 
monopoly-trusts to exist and at the same time attempt to 
prevent or punish small monopolies, combinations and 
agreements to destroy competition. If the big fish are 
to pass at pleasure through the meshes of the law against 
monopoly, the little ones can and will surely follow 
through the opening. In every domain of life the new 
oppression will confront and annoy. The bondage will 
not be that of a hundred feudal masters, but that of a 
thousand petty tyrants. The "combines" of the butchers, 
the bakers and the candlestick-makers will emulate the 
greater trusts, just as the allied plumbers and plumbing 
material men in Chicago have already done, fix prices and 
regulate the citizen's rights at their will. The legal wall 
against monopoly is useless against small monopolists, 
so long as it is prostrate in front of the great ones. A 
general inundation by the Mississippi cannot be pre- 
vented by attempting to' maintain an effective levee along 
portions of the river while there is no banner at the most 
critical points. It is a system of universal private mon- 
opoly that we are invited to adopt. 

Already the advance guard of this incursion of monopolistic vermin is 
making its appearance. Two examples will serve where twenty could 
be given: The Chicago plumbers and the dealers in plumbers' material 
are now in combination and prevent any householder from buying any 
article of plumbing material, and hence from doing any repairs for him- 
self. A house builder is prohibited from using any plumbing material 
he may have on hand, but must buy new from the monopoly dealer. An- 
other sample of the new method is thus editorially stated in the Chicago 
Tribune for November 23, 1899: "The situation in the horseshoeing in- 
dustry in McLean County, Illinois, is typical of present trust methods. 
The blacksmiths and horseshoers of that county met Tuesday and or- 
ganized what they call a 'county protective association,' but which is in 
effect a trust. They have adopted a new scale of charges that provides for 
an increase of 20 per cent, in the price for horseshoeing. The excuse 
given for the increase is that the price of materials has been raised by 
the manufacturers. One would expect that the maintenance of a black- 
smiths' trust would be difficult, but the farriers have the aid of the manu- 
facturers in carrying out their plans. The hardware association, from 
which they buy their goods, has agreed that it will charge a prohibitive 
price to all blacksmiths and horseshoers who are not members of the as- 
sociation. The result will be that the public will be forced to pay the 
Increased prices and possibility of competition is prevented." * 



34 TRUSTS OR COMPETITION? 

MONOPOLYTRUSTS AND SOCIALISM. 

This thought is crystallizing in the minds of many 
American citizens to-day: The end of competition will 
be the beginning of socialism, in some form.* There is no 
middle ground on which society can stand for a day. It is 
like the meeting of the land and the sea; as the shore is. 
only a line marking the point where the one leaves off and 
the other begins, so established monopoly will be the 
line showing where competition leaves off and govern- 
ment ownership begins. No people of Anglo-Saxon line- 
age will long consent to live under conditions imposed 
by irresponsible private monopoly. It is either a restora- 
tion of economic liberty, or monopoly by the people, for 
the people. If, in the progress of human society, the hour 
has struck when socialistic methods must needs dis- 
place the historic order, very well; along the line of genu- 
ine evolution the inevitable is seldom a calamity. But 
most of us believe that no such epoch is at the door un- 
less it be invited, hastened and compelled by human folly. 
And this is the crowning offence of the new system of 
monopoly-trusts, that so far as in it lies it forces society 
forward before the time, on the road which has but 

"The capitalist and captain of industry in these later days has set 
himself to demonstrate that the theories of the socialist are sound. 
After some centuries of adherence to the principle that competition 
brings the best results and the greatest progress for the individual and 
for society, suddenly many thousand employers and capitalists rush 
out of business, give up the positions they occupy and the plants they 
own in order to avoid competition and set themselves to prove that 
society can be best and most cheaply served and the workers and 
managers from highest to lowest can get better returns, if all pro- 
ductive work in each branch is performed by a single, centralized 
body-, controlling wages at pleasure, abolishing agents and middlemen, 
restrained by no competition and responsible only to society as a 
whole. If this theory be true, does it not folloAV as a matter of course 
that society as a whole might better take possession of the plants and 
control the business and absorb for itself the profits of production or 
the gains by cheapening production at its pleasure? 

If the modern combination proves that competition is no longer a 
benefit, but a curse; that individual struggling for success is no longer 
needed to evolve the best inventions and devices to bring them into 
use; that the monster corporation can work more cheaply, and at the 
same time more wisely and ably in handling many establishments of 



A STRIDE TOWARD SOCIALISM. 85 

one ending. It is not difficult for the thoughtful to con- 
cede that present social arrangements are probably not 
permanent, but if we are to escape sharp disaster the 
preparation for the new social dispensation must be far 
more gradual than the trust-builders seem disposed to 
permit They would scarcely need to ^change their 
course or modify their plans if they really wished to force 
the American people to choose forthwith between the 
devil and the deep sea, of monopoly on the one hand and 
socialism on the other. Leading exponents of the social- 
istic scheme here and abroad believe their day is dawn- 
ing and they look to the monopoly-trust movement as its 
harbinger. 

As to Trust Prices. — The question whether trusts 
will ultimately fix prices high or low has from necessity 
been discussed incidentally in previous portions of this 
argument. Obviously the time has been too short, and 
from other causes the recent market situation has been 
too chaotic, to predicate anything of present trust prices. 
All prices have risen sharply during the main develop- 
ment of the trust movement, but only here and there can 
such rise be clearly and fairly traced to monopoly influ- 

different kinds, far apart and under different circumstances, than the 
individual owners who have created them; that *it» can prevent the 
frequent stoppage of the weaker works, while the stronger continue 
to thrive; that society no longer needs any defense against monopoly, 
because the monopoly must always cheapen in order to enlarge busi- 
ness, and that workers, consumers and employers will all gain by elim- 
ination of competition, then, indeed, the socialist has only to demand 
the logical completion of the journey. There will be no sense in leav- 
ing the big corporations to blunder along, sometimes losing and some- 
times hurting society by unwisdom, when society itself can appropri- 
ate their plants, direct their labor, make and bear its own blunders 
and pocket its own gains. — New York Tribune, April 27, 1899. 

The thinking socialists of to-day approve of all combinations and 
trusts, recognizing the obvious fact that it is only necessary for eom- J 
binations to move forward to bring us to a period of socialism. This 
idea is clearly brought out in Laurence Gronlund's "Danton in the French 
Revolution." A political economist recently remarked: "If I were a 
socialist I woula say to these industrial leaders, 'Keep right on, gentle- 
men; you are realizing for me my dreams. It is now only necessary for 
me to fold my hands.' " Socialism means a universal trust. Combine all 
trusts into one and then it is only necessary to place a representative of 
the people in control to have socialism pure and simple.— Prof. Richard 
T, Ely in "Problems of To-day." 



86 TRUSTS OR COMPETITION? 

ence. There is merit in the contention of many oppo- 
nents of the trust that this subject of resulting prices 
to consumers is really subordinate to many others that 
are involved in the trust system, much as this claim 
may surprise or amuse gentlemen who have become ac- 
customed to viewing all things through the glass of a 
student of economics. In the life of a people, as of an in- 
dividual, a hundred occasions arise when economic con- 
siderations have to be given a secondary place or be 
wholly ignored in order that more fundamental prob- 
lems, ethical, political or sociological, may be solved 
aright. A mere assurance to the community of some- 
what lower prices for certain commodities would be a 
shabby return for a surrender of industrial liberty— as 
though the state should tender to the self-respecting citi- 
zen free board if he would consent to live in exile. But 
the trust is not even strong on the sordid or mercenary 
side of the argument. Such has been the experience of 
mankind with those partial and temporary monopolies 
which have hitherto existed that the term "monopoly 
prices" has become fixed in the common speech of the 
people and with a meaning that nobody misundestands. 
Idioms like this do not grow out of nothing. No recog- 
nized and disinterested authority has yet made the claim 
or ventured the prediction that the trusts, when settled 
in the saddle, will fix prices lower than they would be 
under a competitive system. Professor Jenlis says they 
could do so, but will not. The only question among the 
political economists is how far above a competitive level 
trust prices will finally be held. Even those writers w r ho, 
like President Hadley as quoted herein, take the most 
hopeful view of the situation, only venture this assur- 



The fixing- of prices by all who have goods to sell is for the purpose 
of making the highest possible profit, whether monopoly or not. The 
.monopolist puts his price as high as he can without thereby lessening 
the demand for his goods more than enough to> counterbalance his 
high profits ©n each individual sale.— Prof. J. W. Jenks in Johnson's 
Cyclopedia. 



EFFECT ON PRICES. 87 

ance, that in the long run, after the trust managers have 
learned wisdom from rough experience, "after a great 
many legitimate interests are sacrificed in the process/' 
and after making full allowance for potential com- 
petition, trust prices will range above, but not exorbi- 
tantly above, the level at which fair competition would 
have placed them. Professor Jenks says the same thing 
in different language, and both make allowance for the 
prevalence of high monopoly prices in many lines and 
for uncertain periods because of the combined greed and 
suicidal folly of some trust managers. 

It is not improbable that even this rather somber 
price outlook fails to reckon with one important factor: 
Society has had absolutely no experience with a gen- 
eral, solidified, accepted and permanent monopoly sys- 
tem, such as our trust movement is or aims to be, and 
such as a policy of public toleration will permit it to 
become. So-called monopolies of the recent past have 
been only apprentices, tyros in the art compared with 
the new arrival. They have been hampered and harassed 
at every turn in their efforts to assert and confirm their 
monopoly advantage; they have been driven from one 
illegal refuge and expedient to another by the law offi- 
cers and the courts; they have needed to conciliate in 
order to survive; they have thus been in no position or 
mood to antagonize society by unduly raising prices. A 
budding monopoly which, like the Standard Oil in the 
past, is kept busy defending its corporate life and crush- 
ing out surviving competitors, has ample reasons of di- 
plomacy for holding prices at or below the competitive 
level, until the period of stress, struggle and odium is 
passed. The price policy of such a monopoly under such 
conditions can furnish no criterion by which to judge 
the probable course of our present family of monopolies 
when they shall have been freed through legal recogni- 
tion and the cessation of public criticism from most of 



88 . TRUSTS OR COMPETITION? 

the disabilities which have held down their predeces- 
sors. 

As to restraint of monopoly through potential or 
possible competition, all economists agree that trust 
prices will have to be placed and held very materially 
above the competitive level before new competitors 
with adequate capital, skill and experience will be 
tempted to enter the field against the enormous enginery 
of crushing power wielded by a continental monopoly- 
trust. In any event, the trusts L will hold prices as high 
as their self-interest dictates. Where that self-interest 
is enlightened, by long experience or otherwise, prices 
will be considerably, but not excessively, above the 
competitive plane; where it is unenlightened prices will 
be correspondingly higher, until something breaks — and 
meantime, as President Hadley remarks, many legiti- 
mate interests will be sacrificed. 

However, it is sufficient to accept the moderate out- 
look first above referred to. If the people are to pay not 
lower, but somewhat higher prices, under the trust dis- 
pensation, as even the most favorable view concedes, 
what return are they receiving for their enforced sur- 
render of industrial freedom, for their permanent exclu- 
sion from industrial pursuits? They are invited to go 
into industrial exile for their own economic advantage, 
and then not only is that advantage withheld, but they 
are taxed for the privilege of such exile. They are in- 
vited to exchange their bread for economic cake, and in 
fact receive an economic stone. 



APPENDIX 
TO THE ARGUMENT AGAINST THE TRUST. 



CONCERNING TRUSTS IN EUROPE. 

In the course of the "foregoing argument against the trust the 
statement is made that the system does not prevail in Great Britain 
nor in continental Europe, whence the inference, is drawn that the 
movement in the United States is probably artificial and not a 
necessary trade evolutions This inference is manifestly' important 
if true. Inasmuch as President Hadley of Yale Unrversity, in his 
writings, in common with several other economists, assumes rather 
than states that in effect, if not in form, our monopoly trust system 
does prevail in the leading commercial countries of Europe, the 
editor addressed him a note of -inquiry on the subject,^ calling his 
attention to the very explicit letter, printed on another page, from 
Mr. Percy Sanderson, the British Consul-General at New York. 

It was suggested that abou^; the only approach to the typical 
American trust yet developed in England was the group of matador 
ous industrial bubbles inflated by the notorious Hooley and his titled 
retainers— enterprises which even the most zealous champion of the 
trust system would scarcely claim as the offspring of economic 
evolution. In his courteous response, flated November 14, 1899. 
President Hadley says: "All the German authorities unite in the 
quite unequivocal statement that the industry of that country is or- 
ganized in close combinations or syndicates, analogous to trusts, 
and give a sufficient number of details to make the correctness of 
their information unquestionable. The best summary is found in 
Liefmann on Industrial Combinations. It has not been translated into 
English. For matter bearing on the subject in France ,refer to the 
files of the Journal des Economists and the Revue d'Economie 
Politique." Of Great Britain President Hadley says: "English in- 
formation is more scattered." He refers to the well-known Mogul 
Steamship case (in deciding which, some years ago, the English 
courts seemed to assert the broadest liberty of combination among 

89 



90 TRUSTS OR COMPETITION? 

competitors) and concludes thus: "This will probably refer you to 
other cases. The English keep these matters so quiet that you do 
not find out about them until they get into the law courts. I wish 
I had time to look up references in detail, but pressure of business 
makes it impossible. If you are not already familiar with Liefman 
you will find it well to get at it at once, for it is the one really com- 
prehensive and systematic book on the subject which has been 
issued in any language." 

Thus, wmile President Hadley seems not to have at hand any evi- 
dence of the existence of monopoly-trusts in Great Britain, and they 
certainly could not exist to any appreciable extent without the fact 
being known to the public, he makes a somewhat positive statement 
respecting Germany, mainly on the authority of Dr. Liefmann. In- 
dependent investigation led the writer to suspect that Dr. Liefmann's 
references had been misconstrued and to believe that Germany was 
no exception to the rule that even in effect or substance the American 
trust system does not prevail in European countries. An effort to 
settle this point on authority which no one c&uld question resulted 
in the correspondence which is given herewith. It is well known 
that the German consular service in' the United States is character- 
ized by the most thorough-going intelligence respecting the commer- 
cial, industrial and financial conditions prevailing both in Germany 
and America. This is especially true of the Imperial German Con- 
sulate at Chicago, which includes in its membership a most com- 
petent trained specialist on these subjects in the person of Mr. G. D. 
Waetzoldt of Berlin. Such an expert, necessarily and constantly 
studying and coming in contact with the practical and comparative 
workings of commercial and industrial methods in both countries, is 
obviously the best possible authority on such a question: 

Chicago, Nov. 27, 1899. 
Mr. G. D. Waetzoldt, Technical and Commercial Attache, Imperial 
German Consulate, Chicago. 

Dear Sir: — * * . * You are aware that a very large number of 
leading industries in the United States. have been practically unified 
or consolidated, each under a single ownership technically called a 
trust. This has been accomplished in each instance by the organiza- 
tion of a corporation and the purchase by it of the plants and busi- 
nesses (not the stock capital) of all or nearly all the manufacturing 
concerns constituting a given industry within the republic, thus 
suppressing all effective competition and creating a virtual monopoly 
in such industry. 

Inquiry has brought to me the information that no trust system 
or movement substantially like ours exists in the German Empire, 



DOES THE TRUST PREVAIL IN EUROPE? 91 

but that in each of your leading industries there is an understanding 
or syndicate arrangement whereby all manufacturers agree upon a 
minimum selling price throughout the Empire, which price is usually 
fixed at a very moderate margin above the cost of production, the 
general object being to prevent what is known here as cut-throat com- 
petition, and to maintain a level of prices fairly remunerative to pro- 
ducers and not oppressive to consumers; that above this low level 
of prices entire liberty of fixing prices prevails; that in other respects 
the usual forms of reasonable competition are practiced among the 
members «©€ each syndicate, as in the case of competitive bids for 
contracts, purchasing of raw material, etc.; that there is no consider- 
able movement in Germany toward the merging of an entire in- 
dustry throughout the Empire in one great corporation with a view to 
eliminating competition and creating and maintaining a virtual monop- 
oly; that each manufacturing concern which is a member of a syn- 
dicate maintains/ its entire industrial independence. 

I wish you would inform me whether the foregoing information 
is substantially correct, and give me any further facts at your dis- 
posal as to the practical working of the German syndicate system. 
For example: 

1. What is the attitude of each syndicate toward new competi- 
tors, or those who propose to become competitors in the same field? 

2. Are these syndicate arrangements or organizations consid- 
ered entirely lawful? 

3. Is there any popular protest against them as being monopo- 
listic, and do consumers complain that prices are exorbitantly high 
in any lines because of these agreements or combinations among 
manufacturers? 

4. Are these syndicate agreements usually in w r ritten form? 
What penalties attach to their violation, and are they enforcible at 
law? 

5. Do these syndicate agreements in any instances include a 
limitation of product for the purpose of preventing supply from out- 
running demand, and thus dropping market prioes below the level of 
cost? Yours truly, 

A. B. NETTLETON. 

REPLY. 

Chicago, Nov. 28, 1899. . 
Gen. A. B. Nettleton, Chicago, 111. 

Dear Sir:— Replying to your favor of November 27th, I take pleas- 
ure in giving you the following information concerning "trusts" in 
Germany: 

You are right in assuming that corporations or "trusts" of the 
character such organizations have in the United States do not exist 
in Germany. There may be in Germany some corporations or syn- 
dicates that come pretty near to your system of purchasing and clos- 
ing, indefinitely or temporarily, competing plants; but such cor- 
porations are not as numerous, powerful or far-reaching in scope 
of monopolization as, for example, are- the American Steel & Wire 
Company or the International Paper Company. 



92 TRUSTS OR COMPETITION? 

The most characteristic feature of the "Trust" in the United 
States consists in the purchase of plants and businesses by the or- 
ganizers of the Trust, the retirement from business of the former 
owners of these plants and businesses, and the loss of their individual- 
ity by the concerns that are absorbed by the new corporation. There 
are, of course, cases in Germany where smaller concerns are bought 
up by larger ones, as, for instance, Friedr. Krupp buying mines or 
shipyards; but as a rule such purchases are not made for the purpose 
of forming a trust or monopolizing a certain industry. As you point 
out in your letter, the general object of numerous associations or 
syndicates of manufacturers in Germany is to prevent the ruin of 
their respective industries by "cut-throat" competition through an 
agreement concerning the minimum selling price of manufactured 
goods. The form of these agreements differs largely and ranges 
from a "gentlemen's agreement" to the most rigid stipulations. 
Aside from agreements as to minimum selling prices there are agree- 
ments made occasionally in regard to the establishment of central 
offices for the sale of the goods manufactured in the plants of the 
members of the syndicate or for the distribution of orders among 
them or for both purposes. Every individual member of a syn- 
dicate or association remains in absolute control of his plant or plants, 
and is not in any way interfered with or hindered in running his 
plant or plants as he deems best to gain advantages by producing at 
a cheap rate. 

Answering your special questions. I would state as follows: 

Question 1. The attitude of syndicates toward new competitors 
in the same field depends on the character of the syndicate or the 
new competitor. If a friendly understanding is out of the question, 
the syndicate will be compelled to protect its interests by all lawful 
means. 

Question 2. Syndicates or organizations of the character men- 
tioned above are lawful. In conducting their business or fixing their 
rules, they have, of course, ~to comply with the laws concerning 
the formation of commercial corporations or stock companies. 

Question 3. There is no popular protest against the syndicates 
as being monopolistic. Complaints are made occasionally by some 
manufacturers, when prices of materials in crude or semi-crude con- 
dition are raised by syndicates. 

Question 4. Syndicates' agreements are usually in w T riting; the 
penalty for violation thereof consists in fines enforcible at law, pro- 
vided that the syndicate itself is lawful. 

Question 5. The sole purpose of some of the syndicates is to limit 
production and to prevent the market price from dropping below the 
cost of productipn through overproduction and consequent over- 
stocking. Yours very truly. 

G, D. WAETZOLDT. 

COMMENT. 

I. Inquiry elicits the information that the industrial syndica/tes 
in France are not more like American trusts than are those of 
Germany. . . - 



TEE FUTURE OF COMPETITION. 93 

II. It becomes evident that those American writers on economics 
who have assumed without original investigation that our monopoly 
trust system substantially prevails in Europe are dimply mistaken, 
and their economic deductions based on that assumption are not 
only valueless, but are distinctly misleading at a most critical time 
in our own industrial history. 

III. It is apparent that although the German syndicate system 
possesses objectionable elements, is open to some abuses, and would 
at present be illegal in the United States, it is nevertheless free 
from nine-tenths of the injurious and dangerous feature's which 
characterize the American monopoly trust system, and which have 
been outlined herein. 

IV. It is not impossible that the next and permanent form to be 
taken by American industries will in many respects closely resemble 
the present German system, with such modifications as will adapt 
it to our circumstances and to the genius of our people. Most think- 
ing persons agree that it is desirable, if not indispensable, to find a 
reasonable middle ground between unbridled and destructive com- 
petition on the one hand anch arbitrary and intolerable private 
monopoly on the other. Such a system would permit the free play 
of economic forces within the lines of public welfare; would preserve 
all that is valuable in the competitive system, while avoiding most 
of the evils that have heretofore been regarded as inseparable from 
it; would encourage large-scale production up to the maximum of 
efficiency and economy, but would prohibit passing beyond that natural 
limit to the stage of monopoly for the sake of monopoly; would in- 
troduce common sense into the methods of production and distribu- 
tion, and banish the lunacy involved in the old theory that com- 
petition is necessarily commercial war; would allow producers 
to co-operate or agree in order to compete more humanely, more 
sensibly and more profitably, but would prevent combination and 
agreement to monopolize and oppress; would preserve independent 
and diversified proprietorship and maintain the open door. It goes 
without saying that such a result would be a compromise; that it 
would require on the one hand the disintegration and retirement of 
the modern trust system, and on the other a modification of the rule 
of public policy and of statute law, which now in many places pro- 
hibit even reasonable agreements to regulate competition, preserve 
the solvency of industries and the steadiness of business and em- 
ployment, and thus promote the public welfare. 

V. In scores of instances throughout the United States local and 



94 TRUSTS OR COMPETITION* 

general industries have been for years, and now are, protecting them- 
selves from mutually destructive competition by arrangement or 
harmony of policy as to prices and other details of business without 
entering into affirmative agreements or combinations that are con- 
trary to public policy, or, in violation of anti-trust statutes. Ex- 
amples are the two leading telegraph companies, the fire great ex- 
press companies, practically all of the trunk railway lines and many 
manufacturing industries not merged in trusts. This course, which 
may be denominated concert without compact, is distinctly favored 
by the United States Supreme Court in its decision of the Joint Traffic 
Association case (Supreme Court Reporter, Vol. 19, No. 3, page 35). 



Students of the trust problem will profit by reading the re- 
markable book entitled "Anglo-Saxon Superiority: To What Is It 
Due?" by Edmoiid Demolins, director of the French review, "La 
Science Social" (1898). Written by a leading French specialist in 
sociology for a French audience, it is a marvelous grouping of facts 
and arguments in proof of French degeneracy along nearly all 
lines, and what is still more remarkable most French critics com- 
mend the book and its conclusions. M. Demolins not only admits, 
but proclaims, that the French people are afflicted with a v racial in- 
feriority which manifests itself in commercial, industrial, financial and 
domestic affairs; in short, that the radical defect inheres in French 
character and hence inevitably shows itself in about* every mani- 
festation of French life. This includes a limitation of progeny for 
economic reasons to a point which at length threatens the relegation 
of the French nation to tine third or fourth rank. The chief 
fundamental difference between the Latin and the Anglo-Saxon 
character, the French author finds to be this: The Latin inherits 
and absorbs from his environment the communistic or gregarious * 
taint and tendency, while the Anglo-Saxon both inherits and cul- 
tivates the tendency to individualism or particularism. The out- 
working of these diverse tendencies in racial character, method and 
aptitude goes far to account for the inferiority and decadence 
of 4he Latin and the superiority and sustained progress of the 
Anglo-Saxon. The Frenchman is born and trained to lean upon 
the state, upon society, upon organization and institutionalism, to 
live and move in herds, and in an atmosphere of dependence and op- 
portunism. French boys are mainly educated in how not to take 
the initiative, how to avoid an independent or individualistic career, 
how to "get a job" and hold it, in the army, the navy, the church, 
in the civil list, or in subordinate service for a great organized in- 
dustry. On the other hand, Anglo-Saxon youth, at least hitherto, 
have mostly been taught from the first to stand alone, and then to 
carve their own way in life, with a strong preference for being first 
in their own establishments, though small, rat*her than holders . of 
chairs and recipients of salaries in governmental or industrial bu- 
reaus, The difference in result is the difference between men and 



EVILS OF OVERCAPITALIZATION. 95 

bureaucrats, between advance and stagnation. The candid student 
of current events may conclude that a central wrong of the 
American trust system is that it introduces a Latinizing tendency 
into Anglo-Saxon civilization; that it is thus a force which makes 
distinctly for degeneracy in our national character. So far as its 
influence extends, and it is far-reaching, it threatens to produce in 
America conditions resembling those in France and other Latin 
communities, as frankly characterized by this eminent and fearless 
Frenchman. Robust individuality, self-reliance/ power and prefer- 
ence of initiative, distinctive personality, ingrained choice of in- 
dependence, instinctive revolt aganst bossism, these, combined with 
that saving common sense, which gives power and aptitude for self- 
respecting association and co-operation for producing large results, 
are the traits which all recognize as forming the base and crown 
of Anglo-Saxon character and civilization. Yet these are precisely 
the traits which the new system of monopoly-trusts must under- 
mine and largely eliminate before it can become the accepted indus- 
trial and commercial policy of our people. 



Professor Jenks defines a trust, or capitalistic monopoly, as an 
organization which "so controls business, whatever it may be, as 
practically to regulate competition and to fix the prices of its prod- 
ucts on the whole with little reference to competitors, or to the 
cost of production, but mainly with reference to securing the great- 
est net results." 

OVERCAPITALIZATION. 

In spite of all glosses the systematic and audacious over- 
capitalization of trusts is a wrong of the gravest character and 
greatest magnitude. (1) Without the inducement of this fabulous 
reward to fDromoters, their bankers and some manufacturers, the 
trust system as it now is w^ould have been non-existent. (2) It 
deludes and swindles investors, and while there is some justice 
in the contention that intelligent persons w r ere sufficiently w 7 arned 
by the abnormal and evidently speculative nature of the invest- 
ment, yet the great mass, particularly of small investors, cannot 
discriminate. (3) But the central and enduring evil of overcapi- 
talization lies here: This fictitious capital and the possibility of 
making it w T orth par in the market is the colossal bribe urging 
on the trust owners and managers to extort from all available 
sources profits large enough to accomplish this result. The 
element of w^ater in our existing trusts does not fall below 
$3,000,000,000. If dividends are to be paid on this bulk 
of spurious capital, or on any great part of it, this new and 
added burden upon our industries must fall somewhere. There 
are just three sources from w T hich this dividend fund can be 
drawn: First, from legitimate economies resulting from large- 
scale production and distribution, and these are not equal to one- 
tenth of the requirement; second, from reduced rewards 



96 TRUSTS OR COMPETITION 9 

to labor and to producers of raw material; and third, from 
higher prices' to> customers. flo illustrate by approximate fig- 
ures: Before the trust came the owners of all American tin 
plate mills were content to make a profit of say ten per cent, per 
annum on an actual investment of $10,000,000. Here- 
after they will only^be content to make like dividends on £50.,- 
000,000, with but slightly greater investment. Extend these 
figures in due proportion to all the industries that in the past 
two years have been consolidated with stock and bond capital 
multiplied from two to nine times beyond actual values of as- 
sets and good will, and the size of the problem is realized. If 
the monopoly-trust system is really here to stay this tremendous 
mortgage on the future promises never to be discharged. If it 
be again suggested that the fear of possible competition will 
prevent the earning of dividends on much fictitious capital, the 
facts of recent history .do not confirm this hopeful view. Presi- 
dent Hadley, speaking of the temptation under which the mana- 
gers of modern trusts constantly labor to raise prices in the 
absence of competition, says: "Our past experience with in- 
dustrial consolidations proves that very few men are capable of 
resisting this temptation or of exercising the wider power over 
business which the modern system places in their hands,"* and he 
implies that the trust may be expected to hold prices as high as 
it can and not destroy its market and thus destroy itself. But 
a more conclusive answer is the fact that three of our trusts 
are to-day earning dividends on the equivalent of not less than 
$300,000,000 of fictitious capital. The natural policy of 
the managers! of the newer and overcapitalized trusts will be at 
first to keep prices down (1) until competition is permanently 
disposed of, (2) until public criticism is allayed, (3) until they 
have gathered in the outstanding common stock at nominal 
prices, after which they may be expected to fix prices of com 
modifies 'as high as the market will stand, in the absence of 
competition and proceed to pay dividends on both preferred and 
common shares. 

TRUSTS VS. "LARGE CORPORATIONS." 

Prof. Gunton, in Gunton's Magazine, for September, 1899, says: 
"There is not a trust left in the United States. There never were more 
than about half a dozen and they have all been dissolved and converted 
into large corporations. In reality, then, the war on trusts is a war on 
corporations, pure and simple. * * * To call it a crusade against trusts 
-is to practice a fraud upon the people." Senator Mark Hanna in a press 
interview (October 22, 1899), quotes this language of Prof. Gunton ap- 
provingly as virtually disposing of the trust question. It seems incredible 

♦''The Formation and Control of Trusts," Scribner's Magazine, 
November, 1S99. 



TEE TRUST VS. THE LARGE CORPORATION. 97 

that any one should attempt to silence a great debate with a play upon 
words, as if one should attack the ten commandments with a pun. Ex- 
cept these two gentlemen the whole nation, including legislatures, courts, 
law writers, political economists, the entire press and seventy million 
people have agreed to call by the name of trust, that new thing, the large 
corporation organized for the purpose, -and which deliberately monopolizes 
an industry. The name, trust, was, of course, transferred and adapted, by 
a well-known process in language-building, from the real trust organiza- 
tion originally employed. Let us see if an object lesson will make clear 
the difference between a large corporation and a trust: (1) The Baldwin 
Locomotive Works, of Philadelphia, is a corporation, whose large capital 
and whose vast business reaching every continent, have developed natur- 
ally. It has carried large-scale production to the maximum of economy 
and efficiency by repeated enlargements of its one plant. It possesses and 
seeks no monopoly. It meets and does not complain of actual competi- 
tion, domestic and foreign. Its owners are content with, and consumers are 
taxed for, a fair return on a conservative valuation of its business, w T hich 
for the present purpose may be estimated at $10,000,000. This is evidently 
not a trust. (2) The American Tin Plate Company is also a corporation, 
but here the resemblance ceases. It was recently organized for the sole 
purpose of monopolizing the tin plate industry in the United States, 
and this it has done, by absorbing all of the thirty-five establishments, 
thus artificially and arbitrarily suppressing all competition in a neces- 
sary staple. The plants and businesses which it bought had an approxi- 
mate value of $10,-000,000. On this basis the new company issued $50,000,000 
of stock of which President Reed has testified that ten millions were 
given to # Judge Moore, the promoter for his brief service in bringing about 
the consolidation. For various reasons the price of tin plate has been 
nearly doubled in eighteen months. The vice-president of the company 
testifies that it is now earning dividends on the entire stock capital, which 
means that consumers are taxed to pay a return on at least four times the 
investment and fair value of the business. This is evidently a typical 
trust. 

A TRUST DEFINED. 

The report of the Lexow Trust Investigating Committee of the New 
York State Senate, filed March 9, 1897, clearly draws this line of distinction 
between the legitimate and natural centralizing tendency within competi- 
tive lines on the one hand and the monopoly-trust en the other. As to the 
first the report says: 

"Combinations of capital starting with small partnerships and ter- 
minating with large aggregations, based on corporate organizations, rep- 
resenting the contributions of innumerable stockholders to a common 
fund, thus investing for the purpose of reaping the reward arising from 
economies growing out of the concentration of resources and the employ- 
ment of the best skill, the highest intellect, the most improved machinery 
and the most qualified labor, are not in themselves, in our judgment, 
reprehensible or against any known principle of public policy. That the 
latter have been increasing in size, in wealth and relatively in influence 
within recent years, is a sign of the times which naturally' gives rise to 
discussion, to conjecture, and in some cases to apprehension as to the 
future. But it is a situation which seems to be the natural evolntion 
growing out of the fierce contest for supremacy in the fields of commerce 
and finding a reflection in almost every department of human activity. 
That it is a natural evolution seems clear from the fact that it is the uni- 
versal concomitant of progress. Capital and labor operate and should con- 
tinue to exist under the laws of mutual dependence. Both labor and 
capital should be permitted the utmost freedom of liberty and action, 
limited only by regard by each for the other and for the safety and 
welfare of the state." 

Then it thus defines the trust and its working; 



98 TRUSTS OR COMPETITION t 

' 'Interpreting combinations of capital to be the gathering together 
under one management of the collective contributions of many for 
strictly business purposes, involving economy in the several stages which 
result in the final distribution of the product to the consumer, we define 
the trust to be an aggregation brought about for the purpose of operating 
against the natural law of supply and demand, destroying competition 
by combination and unfair methods in order to secure control of both 
product and market, or permitting competition to exist only colorably and 
to the extent of refuting the charge of absolute monopoly. The one 
moves with the natural law; the other is designed to and does operate 
against the natural law." 

A COGENT PRESENTATION. 

The New York Journal of Commerce, the oldest and most authorita- 
tive exponent of conservative New York, in its issue for March 22, 1899, 
editorial^ said, speaking of the trust movement: 

"The change is the most stupendous revolution ever accomplished 
in the history of the world's industrial growth. Its suddenness is as 
remarkable as its magnitude,. It has come with none of the careful de- 
liberation that usually attends the investment of great aggregations of 
capital. It has been guided by no precedent experience. It is no gradual 
result of a natural evolution. * * * It is a reA'ersal of all that econo- 
mists have accepted as fundamental axioms of trade. It is an undeliber- 
ated revolt against the most essential force in the regulation of produc- 
tion, distribution and values— the natural law of competition. It amounts 
to a complete disruption of the relations between the industrial forces 
and classes of society. It is an extinguishment of the voluntary exchanges 
between the producing and merchanting interests and the creation of 
one exclusive producing organization for each industry to which all other 
materia] interests must yield subjection. Industry at large is organized 
into a system of feudalized corporations, each one of which enjoys abso- 
lute power within its special branch of production, while taken in the 
mass the system constitutes itself the supremest trade power in the na- 
tion. These innovations upon the fixed methods of industry, though fun- 
damentally affecting tire citizen's free access to the opportunities of in- 
dustrialism, take little account of legislation, equally ignoring the law 
ais it stands and as it may possibly be changed to meet the case. This 
headlong precipitancy has pursued its purpose almost without forethought, 
certainly with slight consideration for trade moralities or for the weight- 
iest of human liberties and with little regard for the perils of public order 
which the outworkings of the system are too liable to evoke. 

"In advance of the event, it would not have been deemed possible that 
the most important class among our trained and responsible capitalists 
could at one such bound take a daring leap into the dark. The change 
is at best a stupendous experiment. * * * The change, however, is now 
a fixed fact. It places nearly our entire industrial system upon the 
monopolistic basis. That is a venture unparalleled in the history of ma- 
terial civilization; and not merely the manufacturing interest, but the 
still vaster interests thereon dependent, can but await the outcome with 
an expectancy that must grow more intense as the trial progresses." 



It was the central tenet of Karl Marx,-the socialist leader, that social- 
ism would come as a strictly logical and inevitable evolution in nature, 
and that as infallibly as capitalism followed feudalism, so communism 
would follow capitalism. He predicted that under the capitalistic system 
things would constantly grow worse,- and that centralization of capital 
would progress nntil all was ready for a peaceable transition from a cap- 
italistic plutocracy to the ideal socialistic democracy. Supporters of the 
Marxian doctrine point to the trust movement as confirmation of Marx's 
prediction. 



CHAPTER III. 
THE COLLEGE AND THE TRUST. 

Opinions of Economists— Matured Views from Leading Seats of Learn- 
ing—The East and West Represented— Light Without Heat— The 
System of Unified Industries Analyzed— Papers from the Professors 
of Political Economy in Colleges ajad Universities. 



CORNELL UNIVERSITY. 

, Professor Jeremiah W. Jenks, at the Chicago Trust Conference. 

The first formal address before the Conference was delivered 
by Prof. J. W. Jenks, of the Chair of Political Economy in Cor- 
nell University. Besides having for some time made a special 
study of the question, Prof. Jenks was at the time of the Con- 
ference the economic expert, serving as a member of the United 
States Industrial Commission, created by Congress for the pur- 
pose of making an exhaustive official investigation of the trust 
problem in common with other industrial questions of the time. 
The address was entitled "Trust Problems" and is given here 
in full. 

It is a calm and scholarly statement of the questions, raised 
by the trust movement, rather than a discussion of those ques- 
tions. The speaker said: 

It has been well said that the first essential for the attainment 
of scientific knowledge is to get a definite outline of one's ignorance. 
It is certainly true that a long step has been taken toward the solution 
of a problem when the problem itself has been clearly stated. It 
may be of service, therefore, if the various questions which the present 
combinations of capital have raised, and toward the solution of which 
this conference may well contribute much, be brought together. I 
cannot expect to state clearly all of the questions raised by the growth 
of these industrial combinations, but I mention some of the most 
important ones as they have been called to my attention. 

1. Competition versus Combination. — It has often been assumed 
that industrial combinations and monopolies have abolished compe- 



100 TRUSTS OR COMPETITION? 

tition. On the other hand, managers of the most important industrial 
combinations invariably assert that they have much competition, 
and that the principle of competition is still active as long as anyone 
is legally free to set up a rival establishment. Many students of the 
question have asserted that among great industrial organizations 
competition is fiercer than among smaller establishments, and that 
combination does not abolish competition, but simply raises it to a 
higher plane. So long as there is not a state monopoly like that of 
the postoffice, or a legal monopoly like that established by a patent, 
there, of course, is at least potential competition. A rival may at 
least enter the lists. But a question on which many people are not 
yet clear is how far large combinations of capital possess a monopoly 
in fact, and how far these large industrial combinations are able to 
fix prices on the monopolistic principle of securing the highest net 
returns with little reference to what others charge, even though there 
may exist in the business some few other, but, relatively speaking, un>- 
important, establishments. How far can an establishment which 
sells only a high percentage, say 75 to 90 per cent of the total product, 
secure monopolistic gains? Is competition to be considered free when 
one establishment controls from 75 to 90 per cent of the entire prod- 
uct in the market? ^ 

2. Combinations of Capital and Combinations of Labor. — Some 
of the most active opponents to organized capital have been found in 
the ranks of organized labor. Some of the managers of industrial 
combinations assert that they have been forced to combine on account 
of the power of organized labor. They assert that the principle of 
combination is the same in both cases, and that labor organizations 
are no less tyrannous than are organizations of capital. Before legis- 
lation regarding combinations is undertaken the question should be 
clearly answered whether the two classes or organizations are the 
same in principle, and whether a law which restrains one will be held 
by the courts to restrain the other also. 

3. Combinations Caused by Special Privileges. — It has been as- 
serted lately that the "mother of all trusts is the Customs tariff law." 
Many industries, however, in which great combinations exist have no 
protection of their products by the tariff. Managers of combinations 
which have been formed in protected industries assert that it has been 
the fierceness of home competition that has driven them into combina- 
tion, and that if the tariff has been in any sense the cause of the 
combination it has been such only by developing the home industry to 
so great an extent that fierce competition was unavoidable. How 
large a proportion of the trusts does the protective tariff favor? 
Would a lowering of the tariff on protected industries in which in- 
dustrial combinations have been formed destroy the combination, or 
would it merely lead to international combination such as already 
exists at least in one or two instances? Or would it, without breaking 
the combination, have the effect of lowering prices through foreign 
competition? 

Other combinations of great power have been formed in in- 
dustries protected by patents, and have secured monopolistic prices 
through the aid of the patent laws. Would it be in the interests of 
the public and would it be practicable so to amend our patent laws 






PROFESSOR JENKS OF CORNELL. 101 

as to remove from them the element of monopoly while still securing 
to the inventor by royalty or otherwise, according to different sug- 
gestions, a suitable reward for his inventive skill ? 

It has been frequently asserted that the success of many of the 
leading combinations of capital has been due to special favors granted 
them by discriminating rates on railroads. It is also asserted by some 
that the most successful combinations of the present day find it 
rather for their interest to observe strictly the interstate commerce 
law and to insist upon it that the railroads shall grant no discrimina- 
tions to anyone, whereas it is for the interests of those small combi- 
nations that are still struggling for a firm foothold to secure such 
discrimination. It is believed by many people that railroad discrimi- 
nations are still very frequent. Most important questions to be solved 
are, first, one of fact. To what extent and to whom do the railroads 
grant discriminating rates? A-nd second, What further remedy can 
be found for such discrimination beyond that which now exists under 
the interstate commerce laws of the several states 

4. Other Causes for the Formation of Combinations of Capital. 
— Managers of great capitalistic organizations usually assert that 
they have been driven into combination through the fierceness of 
competition; that without combination fair earnings on capital could 
not be realized, and that the trust, instead of being an aggressive 
combination, is really capital on the defensive. They also assert that 
it is only through the power that comes from a large aggregation of 
capital that we are able to meet foreign competition in foreign 
trade, and that without such combination our export trade could 
not be well developed, whereas with the development. of foreign trade 
brought about through the combination of capital they are enabled 
to increase the output that the demand for labor and the profits of 
capital are both greatly increased. How far are these assertions 
true? 

5. Overcapitalization. — Most of the newer combinations of capital 
have issued large amounts of stock, common and preferred, as well 
as of bonds. It is important, at least for the investor, to know the 
facts: How much of this capital is represented in plant at a fair 
valuation? How much in patents or brands? How much in good will 
in the proper sense of that word? How much is "water"? It is 
asserted by some that no harm is done the public even though the 
capitalization be much beyond the value of the plants; that the 
amount of capitalization has no effect on prices. Others, who believe 
that in these combinations an element of monopoly is found, think 
that an attempt to pay dividends on a large capitalization does in- 
crease prices. One class of persons asserts that capital stock should 
be limited to the amount of capital actually paid in in cash or in plants 
or goods taken at a conservative valuation. Another class believes that 
capitalization should be fixed by the probable earning capacity of an 
establishment. It is urged as an example that a newspaper with a 
plant valued at $100,000 may well earn large dividends on a million 
owing to the genius of the editor. Why, it is asked, not capitalize at 
a million? But, on the other hand, should we put into permanent 
securities a value depending on the power of one short-lived indi- 
vidual? Most people would readily grant that genius or even the 



TRUSTS OR COMPBTITIONf 

s shown in investing irises should 

at is it best to put the reward in that 

gas riant which costs $500,000 and 

5 Veen given it may pay g Its inc or two 

mill, as Is it in the public interest that a public franchise 
thus -jurities in private hank> >: as to pay 

Is c w two minions are led thereby not to 

or to make the nature of capitalization of each or- 
- lily learn how large 

a m se- is ropresen plant, how much 

par- bs v how much I- - " will and how much is 

Would such ki^^kedge adequately pro' 
si i Would such k: ledge, by inv repetition, if 

reck profits ide publi; rtly protect the consumer 

niak - trices impossible! Are the interests of tk 

holders and 1 mers under present industrial 

: E .- sts i Prices- — It remains st 

fully established as to what tk il these sonibi re upon 

Inets. A: r pri sa 
raw materials than is normal by the combinat: 

es : the finished product lowered or made higher by 
conk that compel rices sc 

that by forcing intc bankruptcy large numbers of establishments the 
BSts : the public will be s And. from the small 

prices ere :: length above combination rates? Is it 

in the interests rers and the i d at large that the fier : 

com:- - 

Effects a Wages^— Despite the fact th -ge-earners them- 

es - be largely pposet] k the industrial combinations, it 

is : _ -_ asserted the managers : the trust that they have in- 

the wages : the lal ring men. L [hemselyes asse 

tha: these >ns throw m any r_ m rat :r employment 

belie r list that combinations, by controlling practically all of the 
plants : iny me industry are in muck : ondition to resist the 

demands of labor and tc resist any pressure that can be brought upon 
them by threats of strike. A -rrike in one or two or - — ksh- 

raents will not affect the combination materially ?d it can 

in Hie ither establishments a: the same time. 
Th- whether under rk^ system : : omluned 

7 making list thorough ring 

industry, may not be even bettt 
with thr toyers than they are at the present time. If their 

srganisation sorers _ ~ or three plan:- k : to be r 

fttage If then :_- inization :vers the entire industry, can 

" - laborers and capitalists then deal as : onit in fixing wages over 

the whole tej Througk then freemen ts on wages can they 

- readily control the prices U aynsumers than has eve i the 

TheefEe: :ipital at the present time 

m both the rate : irages E he continuity of employment need 

tot- ished; and le for not :: d but for 



ELIMIXATIOX OF MIDDLEMEX. 103 

serious thought remains in the possibilities for the future of such an 
extension of labor unions that the employers and the employes 
throughout an entire industry can with little fear of successful op- 
position from the outside so control the industry that they can practi- 
cally fix prices arbitrarily. The effects of such a double combination 
"upon the consuming community at large need also further study. 

Effects on Middlemen. — A third complaint against great capitalistic 
organizations comes from the middlemen, particularly from jobbers 
and wholesale dealers, who assert that the trusts are eliminating mid- 
dlemen. Is this elimination of the middlemen, as well as the saving 
of labor, to be considered on the whole a gain to the community or a 
loss? If the trusts can deal directly with two or three large jobbers, 
can fix their prices and guarantee their profits, will there be enough 
saving in energy to the community to make up for the loss to those 
who are driven out of business temporarily V Will it also be possible 
within a comparatively short time tor those persons whose business 
is thus ruined, as well for the laborers who are driven out of em- 
ployment by the combinations, to secure employment elsewhere 
through the added demand that may come from the saving of cost 
and of labor merely? In other words, is the new form of organization 
a means of saving energy comparable with a new invention like the 
railroad or the steam engine, so that he may be fairly sure that though 
temporary suffering occurs there will be enough saving to lower pri 
and increase the demand for goods to so great an extent that the 
total demand for labor in the long run will be increased? Or. on the 
other hand, is the new form of organization a conspiracy of the 
few rich and powerful to oppose the many? Each view is taken by 
thousands. 

7. Legislation. — If the state needs to interfere in this modern in- 
dustrial movement, what form of legislation is wisest? Should 
it be destructive and attempt to prevent combination, or should it be 
regulative, permitting combination freely, but attempting so to con- 
trol that evils to the public may be avoided? Of legislation aiming 
at destruction we have had many examples. The question still re- 
mains unsettled as to how far this legislation will prove effective. 
Many points have been overruled by the courts: many have been 
upheld: experience only will show the outcome there. 

If legislation is to be chiefly regulative, will it be sufficient to 
secure publicity, or can something be done to prevent undue raising 
of prices? A second question of not less import is this: How far 
can such legislation be national under the general provisions of our 
Constitution regarding interstate commerce, and how far must the 
legislation be state? Could there be within a reasonable time national 
incorporation of great industries over which the federal government 
should have sole control? If so. would such control be ^advisable? 
Can congress now, under our present Constitution, secure full infor- 
mation, for public use regarding the nature of the property and busi- 
ness of great corporations, and with frequent reports regarding the 
condition of the business, could it so inspect the books and records of 
such organization' that public confidence in reports would be as- 
sured? If such publicity were sought through government would a 
special commission or bureau be needed for the administrative work? 



104 TRUSTS OR COMPETITION? 

Can any of the states, by any measures, effectively promote the in- 
terests of their citizens without laws that are substantially uniform 
among them all V 

There are other problems suggested by the industrial combination. 
I have mentioned the most important ones to which my attention has 
been called. It is hoped that wise and conservative though bold 
action may in no long time solve some of them. 



YALE UNIVERSITY. 

President Arthur T. Hadley. 

In Scribner's Magazine for November* 1899, President Hadley 
has an article entitled, "The Formation and Control of Trtmts*" 
By courtesy of the author and of the publishers of the magazine 
it is permitted to give here the following characterization of the 
paper: 

After some reference to the magnitude and suddenness of the 
trust development the author says: 

"Under such circumstances, the question of industrial con- 
solidation becomes one of primary importance. Is this a tran- 
sient movement or is it a manifestation of permanent tendencies? 
How T far is it likely to go? To wiiat limits, commercial or legal, 
is it subject? How are its evils to be avoided? Is it, as the so- 
cialists claim, a stepping-stone toward a new organization of in- 
dustry under government authority? These are the questions 
w r hich must be asked and answered." 

Answering his own interrogatories President Hadley says 
for substance: There is obviously a natural limit to the number 
of these trust organizations — the number of industries which it is 
possible to unify being itself limited. In large part the motive 
behind this present movement is financial and mercenary rather 
than industrial and economic. Immediate profits for promoters 
resulting from marketing the new securities easily and at high 
prices form a more prominent feature "than the industrial motive 
of rendering the operations of the consolidated company effi- 
cient." * * *■ Those trusts w T hich are the legitimate outcome 
of a natural economic tendency will endure, so that in any event 
the trust system involving practical monopolies of important 
industries is here to stay. "Consolidations w r hieh have been 
forced for selling securities and deceivirg investors will cease. 
But there will always remain* a considerable number which are 
formed for industrial rather than financial purposes: and these 
will probably be more important twenty years hence than to-day. 



PRESIDENT HID LEY OF YALE. 105 

As the world moves on, the relative economy of large concerns 
cerns is as marked in England and Germany as here. The author 
throughout his paper unquestioningly assumes that the typical 
trust holds and operates a working monopoly of the industry 
it represents and if well managed will continue to enjoy this ad- 
makes itself more clearly known." The movement toward large con- 
vantage. He does not even refer to the possible deterrent effect 
of potential competition and merely alludes to the likelihood of 
actual competition springing up in the field occupied by the trust 
in case trust profits are phenomenal. On the other hand he con 
siders the trust as permanently possessing discretionary power 
within wide limits to fix prices of commodities. "The manager 
no longer asks at what rate others are selling; he asks what the 
market will bear. To answer this question intelligently he must 
consider the future development of the industry as well as the 
present. The discretionary power which the absence of com- 
petition places in his hands constitutes a temptation to put prices 
up to a point injurious to the public and ruinous to the perma- 
nence of the consolidated company. Our past experience with 
industrial consolidations proves that very few men are capable 
of resisting this temptation or of exercising the wider power over 
business which the modern system places in their hands." 

After mentioning the economic advantages of the trust sys- 
tem usually claimed by trust advocates. President Hadly says that 
the formidable-looking catalogue "represents possible rather than 
actual achievement: that where one company has secured these 
results, five, or perhaps ton. have failed to secure them; that for 
one combination which has earned large profits by public service 
many have tried to earn large profits by public disservice and 
have frequently ended in loss to themselves and to the public 
alike. But as long as it is possible for a well managed consoli- 
dation to do better work for all parties than could have been 
done under free competition, so long we may expect to see the 
movement in this direction continue. Where there is real econ- 
omy to be achieved, investors [producers?! will try to take ad- 
vantage of the opportunity. The attempt to prohibit them from 
doing so is likely to prove futile. There is no better evidence of 
the strength of the tendency toward consolidation than is fur- 
nished by the multitude of unenforced laws and decisions in- 
tended to prevent it." * * * As to laws prohibiting railway 
pools and traffic agreements, "the. few which have been effective 
have done a great deal of harm and' almost no good." * * * 
The same possibilities of economy which first showed themselves 
in railway combination and consolidation may be realized also 
in productive industry. There is every reason to believe that the 
tendency toward consolidation will be as inevitable in manufac- 



106 TRUSTS OR COMPETITION? 

turing as in transportation. As laws against railway pools led 
to railway consolidation, so laws against industrial and trade 
combinations will lead to trusts in the form of large single cor- 
porations. * * * There are practical limits to economy of 
consolidation more effective than legal ones, namely, the great 
difficulty, often the impossibility, of finding men capable of man- 
aging these great corporations. * * * To make matters move 
in the right direction at least three points must be kept in view: 
(1) Increased responsibility on the part of boards of directors. 
Speculation in the securities of their companies to the detriment 
of investors and consumers through artificial fluctuations in 
prices, etc., must cease. (2) A change in the legal character of 
the labor contract. It is. difficult to outline just what form this 
change should take, but monopoly corporations should be re- 
quired to render continuous service, and not be permitted to sus- 
pend that service because of avoidable strikes, etc. (3) An in- 
creased care in the imposition of high import duties. In. ail in- 
dustries which are at all thoroughly monopolized, public safety 
will generally demand that duties be placed on a revenue rather 
than a protective basis. * * * But there is a still deeper ques- 
tion which many are asking, and to which not a few are giving 
a radical answer. Will such monopolies be long allowed to re- 
main in the hands of private corporations at all? Is it not rather 
true that this consolidation is a step in the direction of state 
ownership of industrial enterprises? Is not a grave crisis at 
hand in which there will be decisive struggle between the forces 
of individualism and socialism, of property arid numbers? * * * 
It is quite within the limits of possibility that many of these en- 
terprises will pass into government ownership in the immediate 
future; but it is highly improbable that this tendency toward 
consolidation is increasing the dangers of a conflict between 
individuality and socialism. The net effect is to diminish these 
dangers by making the question of state ownership relatively 
unimportant to the public as^a whole." * * * The author sums 
up his general conclusions in these words: 

"We may sum up our general conclusions as follows: So far 
as the present tendency toward industrial consolidation is a finan- 
cial movement for the sake of selling securities, it is likely to be 
short-lived. So far as it is an industrial movement to seciire 
economy of operation and commercial policy, it is likely to be 
permanent. Attempts to stop this tendency by law will probably 
be as futile in the field of manufacture as they have been in~ that 
of transportation. The growth of these enterprises creates a 
trust in a sense which is not generally appreciated; it gives their 
managers a discretionary power to injure the public as well as to 
help it. The wise exercise of this trust cannot be directly provided 



TRADE COMBINATIONS AND POOLS. 107 

for by legal enactment; it must be the result of an educational 
process which can, be furthered by widened conceptions of di- 
rectors* responsibility. As this process of consolidation and of 
education goes on, private and public business tend to approach 
one another in character. The question of state ownership of 
industrial enterprises, instead of becoming an acute national 
issue, as so many now expect, will tend rather to become relatively 
unimportant, and may not improbably be removed altogether 
from the field of party politics." 

TRADE COMBINATIONS GENERALLY. 

In his standard work, "Economics" (G. P. Putnam's Sons, 
New York, 1897), on page 155 and following, President Hadley 
says: 

"The simplest form of combination is an agreement to main- 
tain rates where the several competitors promise not to reduce 
their prices below a scale fixed by common consent, with a 
view to giving producers a fair profit. But such an arrangement 
rarely proves effective. Each company is at the mercy of its 
agents. They will try to steal business from rival concerns by 
cutting rates. If they are allowed a commission on sales, they 
will divide it with the buyer; if they are not allowed such 
a commission they will find a hundred different ways, less 
obvious but hardly less effective, of rendering a rate agreement 
nugatory. 

* * * "When competing concerns are thus at the mercy 
of their agents or of outsiders, a resort to closer forms of com- 
bination is inevitable. If it proves that an agreement to main- 
tain rates is not enough, they will arrange a pool or division 
of traffic." 

After mentioning the three kinds of pools: (1) A geographical 
division of the territory as by competing railroad or gas com- 
panies; (2) a division of traffic; (3) a division of the earnings from 
the combined traffic, President Hadley continues: 

"Pools have not been regarded with favor by the law. In 
the United States they are treated as contracts in restraint of 
trade, and therefore void as a gambling contract would be 
void. The courts say that they are against public policy and 
will not aid in their enforcement. In England, the legal decisions 
are much more favorable to pools than in the United States; 
while in most parts of continental Europe they are accepted 
as matters of course; the governments themselves entering into 
pooling contracts with private companies with which they find 
themselves brought into competition in the management of state 
railroads or other industrial enterprises, 



108 TRUSTS OR COMPETITION? 

"In certain kinds of business, notably railroad transportation 
(in the United States), such pools or combinations are treated 
as misdemeanors and an attempt is made to punish their 
promoters by tine or imprisonment; but these efforts to do away 
with pools have conspicuously failed of their object. There are 
many ways of evading them. A joint accounting office may 
take the form of a clearing house established for the con- 
venience of the public, and yet may serve all the purposes of a 
pool. 

INDUSTRIAL CONSOLIDATIONS. 

"The attempt to prohibit combination has proved futile, and 
has simply driven the competing concerns into closer consolida- 
tion. Had it been successful, it must either have retarded the 
development of modern business, and the utilization of modern 
methods requiring concentrated management of capital, or it 
must have subjected all of our large industries to constant 
fluctuations in their scale of prices, which would have been 
hardly less disastrous to the consumer than to the investor. 
But the advantages of industrial combination, when it comes to 
include all competitors, are frequently balanced by the evils of 
commercial combination. The economy connected with the use 
of concentrated capital is in some measure offset by the loss of 
that stimulus which competition alone seems able to give; and 
the resulting monopoly makes it uncertain whether the con- 
sumers will get the benefit of the economy which is actually 
obtained. 

"If a monopoly is managed by inexperienced hands, the effort 
to put prices up is usually more noticeable than the effort 
to put expenses down. It seems so easy to make a profit at the 
expense of society, that managers are apt to neglect the more 
laborious method of making a profit by service to society. When 
business men have been all their lives accustomed to face 
immediate competition, they think that the combination of all 
competitors removes the only effectual restriction upon charges. 
But this is a short-sighted view of the matter which has wrecked 
most of the enterprises run on such a basis, and has made the 
average trade combination a means of hindering rather than 
helping its members. If the managers of a combination make 
it their chief concern to suppress competition rather than to 
realize economies in production, their policy toward trade rivals 
results in violation of commercial morality, if not of commercial 
law. Not content with obtaining unfair advantages in the way 
of discriminating rates for the transportation of its goods, the 
combination tries to exclude its rivals from their accustomed 
markets by methods of boycotting and intimidation, which, when 
t^ey are used by trades unions, provoke fierce denunciation 



PRICES UNDER MONOPOLIES. 109 

from the same men who have been ready to practice them ror 
their own advantage. It is interesting to see how combinations 
of capital and combinations of labor are subject to the same 
possibilities of abuse or mismanagement; and how the same 
violation of commercial right looks excusable to the party bene- 
fited, but monstrous to the party injured. 

TRUST MONOPOLIES AND PRICES. 

"It pays in the long run to bring rates down very near 
to the limits of actual cost if such reductions are followed by a 
large development of traffic. Where a monopoly is of such 
precarious character that it may be subjected to direct com- 
petition at almost any moment, this truth is sufficiently obvious. 
If a concern in this situation attempts to do a small business 
at high rates and make large temporary profit by such a policy, 
new capital will come into the business in the hope of securing 
the good-will and custom of the community by lower rates. 
High charges invite duplication of plant in all cases where 
such duplication is possible. * * * When permanent monopoly 
rights are guaranteed by law in all the competing districts, as 
on French railroads, we are apt to find a system of high charges 
which no nominal powers of public supervision prove adequate 
to control. * * * Among those trusts and other combinations 
that have had apparently a complete monopoly, a large number 
have made conspicuous failures, simply because they thought 
of high prices rather than large sales, and did not see that 
such a policy was suicidal. * * * If a large industrial com- 
bination uses the advantages given by concentration of capital 
to render labor more efficient and obtain a good profit at low 
rates, it has excellent chances of success. But if it makes such 
economy of labor a pretext instead of an object, and uses its 
monopoly to put prices up the danger of failure is wholly dis- 
proportionate to the chances of success. Such a policy may suc- 
ceed for a few years, but sooner or later it seems bound to ruin 
those who adopt it. 

CAN MONOPOLIES BE TRUSTED WITH CONTROL OF PRICES? 

"Can we trust the managers of our large industrial enter- 
prises to see this for themselves? Can we treat their mistakes 
as a self-correcting evil, and wait quietly for the time when 
they shall learn that their own permanent interests are best 
served by doing good public service? To this question it is 
impossible to return a general answer. Our decision in any 
particular case will depend partly upon the character of the 
business involved, partly upon the intelligence of those who 



HO TRUSTS OR COMPETITIONf 

manage it, and most of all, perhaps, on our own habits of mind. 
If we are in the habit of looking at direct consequences and 
disregarding indirect ones, we shall see grounds for active public 
interference in almost all cases of industrial combination. The 
managers of a monopoly have it in their power to do a great 
deal of harm before they begin to feel the loss to themselves 
which arises from the adoption of a short-sighted policy. Even 
if the trouble corrects itself in tli£ long run, a great many 
legitimate interests are sacrificed in the process. A railroad 
ultimately finds it suicidal to kill the local shippers who are its 
best permanent customers: but it is small comrort to the ship- 
pers to know that their deaths are to be slowly avenged by the 
operation of economic laws. The shippers demand some imme- 
diate control over the railroad agent: something which will 
prevent the evil in the beginning, instead of siinpfy sufficing to 

vent its indefinite repetition. They will be prone to adopt 
the socialistic solution of the problem and insist that the govern- 
ment should own the railroad, as the surest means of avoiding 
such abuse - 

"But the man who is in the habit of looking at indirect eon- 
- luences will see that the undiscriminating attempt to prevent 
evil often results in preventing an even greater amount of good. 
He will be prone to take the individualistic view of the matter. 
He will be disinclined, except as a last resort, to put the business 
into the hands of a government whose agents are almost always 
chosen on other grounds than those of industrial efficiency, and 
bods are much less flexible than those of a private 
He will be indisposed to see stringent regulations 
put in force until he is convinced that milder remedies are in- 
adequate to protect the interests of the public as a whole. 

METHODS OF REGULATING MONOPOLIES. 

* * * "We have here to consider the merits of various 
method- regnlati n of such industries, where government 

own rs undesirable or impracticable. These may 

grouped under tl is: <1> Limitation of profits: <2i fixing of 

rates by public authority: (3) enforcement of far-sighted methods 
of management The first of these methods looks much better 
than it really is. It is a favorite remedy of people who have 
bad no practical experience of its working. They say it is very 
urn tonopoly to obtain a much higher dividend than 

would be | Jssible under free competition: and they think that if 
we limit the dividend we shall remove the motive for extortion. 
In practice, the ma::ri loes not work in this way. Laws limit- 
ing profits, if obeyed, tend to keep rates high instead of low; 



METE ' REGULATING MOWOPOUE 111 

if evaded, they substitute a crooked method of distribution for 
a straight one. * * * Lord Farrer, whose long experience 
Secretary of the Board of Trade, gave him unique opportunities 
for observing the effects of various methods of regulation prac- 
ticed in England, say* that limitation of profits does mn cause 
reduction in rates: and that in trying to apply this principle 
Parliament has gone on a wrong tack, and involved the country 
in a "maze of absurdit 

* * * "If laws limiting profits are evaded instead of being 
obeyed, the effects _:ugh different in kind, are equally un- 
desirable. It reduce profits by extravagance in man- 
agement, or by giving officials large salaries. This does no good 
to the consumer, and positive harm to the investor. Such laws 
may also be evaded by inflating the company's capital account: 
a practice known as stock- watering. If a corporation is allowed 
to divide all the money that it makes, there is no temptation to 
honest managers to create a fictitious capital account. But if the 
dividends are arbitrarily limited to 8 per cent when the com- 
pany is really earning 12. the directors are tempted to pretend 
that there has been an investment jof capital one and one-half 
"times as great as has been actually expended. On the bas. 
this supposed investment they issue a stock dividend o: 
per cent. This is in common language *water.* It does not 
represent money actually paid in. * * * If companies begin 
to issue fictitious capital there is no limit to such : 
false capital account gives opportunity for every kind of stock 
speculation, and for all sorts of iflegitimate methods of control 
by financial operators. Many attempts have been made to pro- 
hibit stock- watering; but as long as limitation of profits is at- 
tempted, there are enough honest men who are interested in the 
more defensible forms of stock-watering to rentier it aim 
impossible to detect and punish the indefensible ones. The evil 
from this source alone far outweighs any good that has -~ 
been obtained by trying to limit dividends. 

- me eha: ]y in England, try to combine limita- 

tion of profits with limitation of ra: ~roviding that when- 

ever the profit exceeds a specified percentage, the charges f 
services snail be correspondingly reduced. Others dike those 
of the French railroads i provide that all dividends above a 
certain figure shall be shared with the government. Neither of 
these r ms has won its ~ ato general recognition. 

"By limiting rates instead of profits we have a somewhat 
j more effective means of control. It has the merit of aiming 
* at the right target, whether it hits it or not. Its chief diffi- 
culties are connected with the complexity of the conditions 
affecting modern traffic. It is seldom possible to say what any 



112 TRUSTS OR COMPETITION? 

specific piece of work really costs a -large concern. The cost 
depends upon the amount of work done. The larger the invest- 
ment of capital the more complete is this dependence , of cost 
upon quantity. * * * In fact, the chief means which a manu- - 
facturer possesses for reducing costs is to increase the number 
of his sales so as to make it possible to lower this item of 
expense ["overhead charges," such as interest, insurance, taxes 
and general maintenance, which are about the same whether 
production be large or small]. This is the really, critical element 
in price determination in all cases where large amounts of capi- 
tal are involved; and it is precisely this which public authorities 
are unable to determine in advance, because it is essentially 
speculative in its character. Of course, the business men them- 
selves have the same difficulty; but they are experimenting 
with their own capital, at their own risk, and in lines where 
they have the maximum technical knowledge; while the govern- 
ment authorities, dealing with the capital of others and the re- 
sults of others' experience, find themselves sorely perplexed. 
* * • * Where state ownership is impracticable and private en- 
terprise short-sighted and extortionate, laws fixing rates may 
be the best available resource for the protection of the public; 
but their operation is, in almost all cases, rather unsatisfac- 
tory. 



- COLUMBIA UNIVERSITY. 

Professor James Bates Clark. 

[The following paper is substantially Prof. Clark's brief 
address before the Chicago Trust Conference, but subsequently 
somewhat elaborated at my request so as to give more fully 
the author's view as to remedial measures.— The Editor.] 

I accept and use the popular definition of the term^"tmst." 
It is any corporation that is large enough to be menacing; it 
is a company that produces a large enough share of the entire 
output of some commodity to enable it to have some monopolis- 
tic power, as things now are, and thereafter to keep it. There 
is an intermediate type of trust which can be crushed out of 
existence far more easily by legislation than the trust which 
is the true corporation. You may get rid of unions of different 
companies, each of which retains its separate existence; but you 
will still have the trusts to deal with in the consolidated form. 
There are three things that are confounded in the public mind. 
They are, capitalization as such, centralization and monopoly. 
There is a striking difference between them; and the real line 



PROFESSOR CLARK OF COLUMBIA. 113 

between the parties that loosely call themselves Pro-Trust and 
Anti-Trust is drawn by the manner of treating centralization. 
I wish to record my conviction that centralization is a beneficent 
and permanent thing and that monopoly is evil and almost 
wholly evil. If we cannot have centralization without monopoly, 
we ought to forfeit some of the benefits of the concentration 
itself, as the price that we would pay for getting rid of the 
ev^— monopoly. If we can have centralization without monopoly 
we should have it and thrive under it. 

It is early to hope for much attention to the type of treat- 
ment that the trust will ultimately receive. I hazard the pre- 
diction that legislation will, in the end, draw the line of cleavage 
between centralization and monopoly and not between capital 
and centralization. We should not attack capital, in any case; 
and, to do justice to the anti-trust laws, they do not attack 
capital as such, they attack centralization. In the long run I 
venture to say that we shall find that the futility of these laws 
is the best thing about them. If we actually could crush civiliza- 
tion, for the sake of crushing the monopoly that is sometimes 
associated with it, we should do ourselves an amount- of harm 
that we should regret indefinitely in the years that are to come. 
Do you suppose that, in the fierce competition now begun 
between America and other countries for the trade of xhe East, 
do you suppose that in the fiercer competition that will follow 
between America and Europe on the one hand, and the whole 
East on the other, for the trade of the world, we can afford 
to sacrifice the advantage that comes from making things in 
great establishments? You may say we can, but practically 
we cannot if we are to enjoy the benefits that come from 
economic leadership. 

In this competition for the trade of the world, I want my 
country to come uppermost: and there is only one way in which 
it can do it without sacrificing its citizens. That is, by develop- 
ing to the utmost its producing power. 

There is competing power in cheap labor; but there is a bet- 
ter kind of competing power in efficient labor— in work that 
produces much because it is organized and supplied with the 
best tools. The coming struggle is between the competing power 
residing here and based upon productive energy, and the com- 
peting power residing in the East and based upon poverty. It 
is machines and big mills against "pauper labor;" and the power 
that "is based upon energy will be the one that will survive. 

Is it possible for us to retain our centralization and sup- 
press the evil of monopoly? I must question the wisdom of 
trying in this brief space to give the reasons for believing 
that it is so. I rely upon the lapse of time to produce conviction; 

8 



114 TRUSTS OR COMPETITION f 

and fortunately the lapse of time will not have to be great. 
Why is it almost an open question now whether trusts do or 
do not raise prices? Why is it the fact that they do not raise 
them as much as we once thought they would? Is it a benevo- 
lent impulse that restrains them? Are they filled with the en- 
thusiasm of humanity? Are they a lamblike people who on no 
account would harm the consumer? Have they conscientious 
scruples against accumulating property and making large divi- 
dends? They don't raise prices to still higher levels because 
they cannot; and why this is the case the public doesn't exactly 
know. That they cannot raise prices beyond certain limits 
appears in the records of price quotations since trusts began/ 
They can do it somewhat, but why not more? There is an 
explanation; and it lies in the power of what is now termed 
"potential competition;" it is the fact that high prices will call 
new establishments into existence, that forestalls and prevents 
any great raising of prices. The man who can build a mill if 
he will and who will if the inducement is great, who is already 
the potential competitor, suppresses high prices in advance. The 
producer who is not now in the field but will instantly enter 
it if prices are raised is the protector of the public. 

In lucid intervals, in which it is customary for the man- 
agers of trusts to tell the truth to the people, this is one of 
the things which they invariably tell— the power they are afraid 
of resides in the potential competitor. This is, however, by no 
means the restrainer of prices it ought to be, or that it easily 
can be. That it is powerful, far beyond the imagination of 
those who looked upon the early development of trusts, is per- 
fectly evident from the narrow limits within which prices have 
been raised. - The foreign competitor, kept out by the tariff, is 
a potential competitor, who may be made to become an actual 
one. I am not one of those harmless theorists who propose to 
abolish tl*e whole protective tariff, but I would use the utmost 
discrimination I could bring into the service to manipulate that 
tariff in such a way that it should not be a bulwark of trusts. 
I would open the way to the foreign competitor in those in- 
stances where the tariff is not in the least necessary for the 
industry as such, but is necessary for the trusts within the 
industry. The man whom the trust has scared off by its com- 
mand of patents is a potential competitor, not an actual one. 
A very wise and careful change of our patent laws will make 
him a real power; and, while I have not now a moment to spend 
in describing what should be the change that would be wise 
and careful, I say that sooner or later the patent laws must 
be changed for this purpose— that of liberating competition while 
still stimulating invention. 



THE TRUSTS SPECIAL WEAPON. 115 

There is another type of legislation more important than 
either of these and far more effectual; and in proportion to its 
value is the difficulty of it. If by reason of the difficulty my. 
program should, at this early stage, be ruled out of court, I will 
wait with patience for the time when, by reason of the progress 
of, events, it will make its way into the court again. 

The special weapon of the trust is discrimination in prices. 
There are, of course, discriminations in railroad rates, a most 
important type of unequal and unfair dealing; but that subject 
has been sufficiently treated. Discrimination in the prices of 
trust-made articles is a point even more dangerous than the 
unequal railroad rates, and even more difficult to suppress. If 
a trust can come into my territory and sell goods at ruinous 
prices, while sustaining itself and making profits in another 
territory, it can crush me with ease; and by threatening to 
treat in the same way anyone else who may take my place, it 
may terrorize potential competitors into remaining inactive. 

So long as the trust has such a power the influence of poten- 
tial competition is far from being all that is needed for the pro- 
tection of consumers and of the majority of laborers. More- 
over, there are other kinds of discrimination that are resorted 
to by trusts for securing unfair advantages in the struggle 
with independent producers. There is the plan of reducing the 
price of one type of goods, such as a competitor makes, and 
keeping up the prices of numerous other types of goods which 
the trust makes. There is the "factor's agreement," with the 
clause that binds the merchant who handles trust-made goods 
to refuse to handle any others. Particularly efficient, oppressive, 
and, in spirit, illegal, is this last measure. 

Can we prevent these things? If we must, we can; and it 
is clear that we must. It will, require a federal law to do it 
effectively; and it will require an amendment of the constitu- 
tion to open the way for the law. The law, when we get it, 
will be difficult of enforcement; but we must overcome that 
difficulty, for the alternative is something that we cannot tbl= 
erate— a regime of permanent monopoly. We must force the 
trusts to treat customers alike. We must put every one of these 
customers under what, in diplomacy, would be called a "most 
favored nation clause," and must make them give to customers 
everywhere prices as low as, for competing purposes, they may 
choose to make anywhere. If, then, to ruin me, a trust shall 
make prices that are below the cost of production, it must make 
the cut apply to its entire output. If it does that, it may be that 
I can hold out as long as can the great corporation. Its losses 
will exceed mine as much as does its capital and volume of 
production. We must destroy the power to boycott customers 



116 TRUSTS OR COMPETITION? 

for the offense of handling independent producers' goods. A 
fair field and no favor is what we must get for the competitor; 
and then, even before he enters the field, his latent, power will 
restrain the trust and protect the public. 

What are the possibilities of potential competition? Far 
more, as with more time, I could show, than it has yet accom- 
plished, and enough to make sure that, though we shall Lave 
great corporations forever, we shall not have monopolies. With 
such legal ability as our country possesses, and with such moral 
energy as in this cause it is showing, we can sooner or later make 
and execute the laws that will give fuller efficiency to this force, 
which is already so powerful, and insure that happy combina- 
tion, which I have faith to believe our country will secure, of 
a productive ability that will give us the command of the 
markets of the world, and justice, which will develop the man- 
hood and insure the contentment of our citizens. 



UNIVERSITY OF MICHIGAN. 

Professor Henry Carter Adams before the Chicago Trust Conference. 

I have been requested to undertake a statement of the questions 
that arise in the consideration of the trust problem. In doing this I 
can say nothing that is new, nor shall it be my aim to be exhaustive. 
It is possible, however, that questions which are familiar may pre- 
sent themselves in a new light when brought together, in a single 
statement. 

Whatever the trust problem may be, it has to do with business 
organization, and on this account the first question that suggests 
itself is one that pertains to the science of economics. We observe 
in almost every form of business that industrial power is concen- 
trating itself, that organizations are growing in size, that individual 
and small enterprises are being crowded to the wall, and that the 
sphere of competition is constantly being narrowed. This tendency 
is opposed to the theory upon which our system of jurisprudence rests, 
and it is pertinent to inquire whether it is inherent in the nature of the 
industries that are thus tending toward consolidation, or whether its 
explanation is to be found in the peculiar conditions under which 
industry at the present time is carried on. This is a most impor- 
tant question, for if the tendency toward consolidation be natural, 
remedial legislation should address itself to the control of the in- 
dustrial forces thus brought together. If, on the other hand, this 
tendency be artificial, the legislature, in dealing with the situation, 
must seek to restore those conditions under which individual enter- 
prise may be able to maintain itself. Without undertaking ihe 
analysis of industrial conditions and motives which a consideration 
of this question involves, I shall state at once what seems to be the 
correct opinion upon this subject 



A LIMIT TO ECONOMY IN PRODUCTION. 117 

TWO CLASSES OF INDUSTRIES. 

Industries are not all of the same kind. They do not all possess 
the same character. Some tend toward consolidation and combina- 
tion, while others are well fitted by their character to continue a 
s/parate and competitive existence. The transportation industries 
are of the former class. The manufacturing industries are, speaking 
generally, of the latter class. 

Railways by their very nature tend toward combinations and 
consolidation. The biscuit industry, the manufacture of nails, the 
refining of oil, on the other hand, are well fitted for individual man- 
agement and administration. If these latter, like the former, show 
a tendency toward consolidation, the explanation will be found in 
the peculiar conditions under which they are carried on. Thus again, 
upon the threshhold of this discussion,' do we discover the imperative 
necessity of industrial analysis as a guide to right policy and sound 
legislation. Before coming to the question of general policy, there 
is another question which will undoubtedly be made the sub- 
ject of warm discussion by the convention. Are the combina- 
tions commonly called trusts advantageous or disadvantageous? 
Is the tendency toward consolidation one to be approved or dis- 
approved? It is likely that this discussion will turn upon three 
points:- First, Does consolidation of manufacturing industries tend 
toward the reduction of cost? Second, Will manufacturing under 
trusts, by measuring the output to the current demand, tend to 
guard society from the evils of commercial panics and commercial 
depressions? And lastly, Is this new organization of industry in 
harmony with a democratic organization of society? Here again I 
must ask the privilege of expressing an opinion, as the time allotted 
this paper does not permit a full statement of the reasons upon 
which my opinion rests. 4 

REDUCED COST AND REGULATED PRODUCTION. 

It is common to say that increase in the size of manufacturing 
plant permits the production of commodities at less cost than would 
otherwise be the case. There is undoubtedly some truth in this 
statement. The development of machinery has gone hand in hand 
with the growth of factories, and as a result the product is' furnished 
at a cheapened rate. But there is a limit to the application of this 
rule. Every manufacturing industry, considered from the point of 
view of 'production, has at any particular time a size which may be 
regarded as its normal size of maximum efl&ciency. This normal of 
maximum eniciency is determined by the extent to which division of 
labor and the use of machinery can be applied. To increase such an 
industry by one-half would not result in a decrease of the cost of 
manufacture, for it would occasion a less effective application of the 
principle of division of labor. § 

While, therefore, it is true that the concentration of capital and 
labor under a single direction is followed by economy up to a certain 
point, it is not true that combination and concentration beyond that 
point tend to reduce the cost of the production. He who accepts this 
statement of the case must/ conclude that manufacturing combina- 



118 TRUSTS OR COMPETITION? 

tions, I say nothing of other forms, contribute nothing to the reduction 
of the cost of manufacture beyond what would be contributed should 
each of the industries continue its independent competitive existence. 
This is a curt answer to a profound question, but it is believed to rest 
upon sound analysis and to lead to the conclusion that the motive to 
a trust organization of manufacturing industries is not found in a 
desire to benefit the public by the reduction of cost. 

It is not so difficult to suggest the line of reasoning upon the 
second question submitted. The chief argument in favor of combina- 
tion among producers is that by this means production will be meas- 
ured to demand, and consequently there will be no overstocking of the 
market, no commercial depression and no commercial panics, I 
shall not undertake to argue this proposition, but content myself 
with a single comment. Opposed to this theory of commercial depres- 
sions stands the well-wrought theory of socialistic writers which rests 
upon the claim that a stocked market is due to an uneconomic dis- 
tribution of values, and not jto an overproduction of goods. It certainly 
is true that goods cannot be sold when the property in' the goods, 
as also money with which to purchase them, is in the same hands. 
A steady market implies an equation between goods on the one hand 
and purchasing power in the hands of those for whom the goods are 
made on the other. You perceive at once the bearing of this line of 
reasoning upon the claim that combinations tend to steadiness of 
trade. An adjustment of the output to the current effective demand 
is of the utmost importance. It may be questioned, however, whether 
a yet further concentration of industrial power than that which now 
exists is the best means of attaining this result. 

SOCIAL AND POLITICAL RESULTS OF TRUSTS. 

In addition to these purely industrial considerations it is necessary 
to inquire respecting the general social and political results of trust 
organizations before one can accept them as a healthful tendency 
in modern life. It must be remembered that our industrial society 
rests upon English jurisprudence, that English jurisprudence- ac- 
knowledges the individual as the center of all industrial activity, 
that it provides for him the institution of private property, holds him 
to strict accountability and assumes that competition between pro- 
ducers on the one hand and purchasers on the other hand is a 
guaranty of justice and equity in all individual conduct. Do trusts 
fit naturally into this theory of society? For the preservation of 
democracy there must be maintained a fair degree of equality in the 
social standing of citizens. Do trusts tend to s'uch equality? For 
the normal workings of that industrial society which is the product 
of six centuries of history, the door of opportunity must not be 
closed. Do trusts tend to close the door of opportunity? For the 
realization of the American idea of government there must be a 
balance of power, and the interests that lie outside the government; 
on the other hand^do trusts tend to destroy this balance of power'/ 
I would not claim, Vithout discussion, that the trust organization of 
society destroys reasonable equality, closes the door of industrial 
opportunity, or tends to disarrange that fine balance essential to the 



CAUSES OF THE TRUST MOVEMENT. 119 

successful workings of an automatic society; but I do assert that 
the questions here presented are debatable questions and that the 
burden of proof lies with the advocates of this new form of business 
organization. 

ORIGIN AND CAUSES OF TRUSTS. 

If the current tendency toward consolidation in manufacturing 
industries does not spring from the nature of the industry, and if the 
benefits accruing to the public from these consolidations are at least 
questionable, it is incumbent upon us next to inquire out of what 
conditions these modern industrial organizations have sprung. 1 
shall venture but three suggestions in this connection. Doubtless 
many more will be presented as this convention proceeds in its de- 
liberations. 

The inequalities which exist in established schedules of railway 
rates, as also the proneness of railways to depart from published 
schedules in order to secure the business of large shippers, works 
toward the consolidation of manufacturing industries and commer- 
cial enterprises. It is not intended to say that maladministration on 
the part of railways is of itself responsible for present industrial 
tendencies. It is, however, true that in so far as railways discrimi- 
nate in favor of large shippers they present a motive to shippers to 
become as large as possible. This is too familiar a fact to call for dis- 
cussion. The truth is, that the business of transportation underlies 
all other businesses; it determines the conditions upon which other 
forms of industry are carried on, and by the manipulation of rate 
schedules tone, color and character can be given to industrial society 
at large. While the solution of the railway problem would not neces- 
sarily cause all trusts and combinations to disappear, its solution is 
essential for dealing wisely with the trust problem. No one can 
deny that inequitable railway charges and discriminations in railway 
rates are an important element in the conditions that foster commer- 
cial combinations.. 

In further explanation of the current tendency toward business 
combination on the part of industries that by their nature are not 
monopolistic, reference may be made to the fact that the commercial 
jurisdiction of modern business is much broader than the political 
jurisdiction of the governments whose protection they seek and by 
whom they should be controlled The federal government has no 
authority over many of the questions raised by the study of trusts, 
while the state governments are confined in the exercise of their 
authority to their local jurisdictions. 

LEGISLATION— FEDERAL AND STATE CONTROL. 

Such a condition must result in confusion of laws, in uncertainty 
of procedure and in enabling the interstate enterprises which rest 
upon state foundations to become a law unto themselves, so far as 
the conduct of their affairs is concerned. Competition cannot work 
equitably under such conditions. Justice attends competition only 
when competitors stand on an equal footing. It is, therefore, no 



120 TRUSTS OR COMPETITION? 

occasion for surprise to one who is familiar with the present con- 
dition of state laws upon industrial affairs that small and localized 
industries should find themselves at a disadvantage in their struggle 
for existence with the great combinations. A national market has 
taken the place of the local market, but we still rely upon local law 
for its regulation and control. Uncertainty of law and harmony of 
procedure are as essential as uniform railway rates and absence of 
discrimination to restore those conditions in which competition can 
affect its normal and beneficent results. 

W£ are thus carried by our analysis from the consideration of 
economic relations to the stupendous question of political organiza- 
tion and legislative procedure. He who believes in local government 
will not readily consent to the proposition that the federal congress 
should assert exclusive authority over commercial and industrial con- 
ditions. Nor, on the other hand, wilf he who appreciates the signifi- 
cance and the beneficent results of a world's market consent to the 
suggestion that the business transactions of a state concern should not 
extend beyond the borders of a state. Here is a problem for states- 
men to contemplate, and it is possible before arriving at its solution 
that the constitutional relations between! the local and the federal 
government will be subjected to modification. Without entering upon 
this phase of the subject, may I submit for consideration the follow- 
ing proposition: The true function of a central government in dealing 
with problems of internal economy is to determine the fundamental 
principles of legislation, while the true function of local government 
is to express those principles in the terms of local conditions and to 
administer the laws thus expressed. By this means harmony of 
action, at least, would be secured, and one of the conditions out of 
which industrial combinations spring will have been set aside. 

My third suggestion in explanation of the persistence of combina- 
tions in industries which from their nature are subject to competition 
is found in the unsatisfactory condition of state laws of incorporation. 
This is a question that should be considered by a lawyer, but by the 
lawyer who is familiar with the industrial history of the English- 
speaking people. Originally a corporation created by the state was 
regarded as an arm of the state. Individuals were clothed with some 
degree of public authority because they undertook to perform what 
were regarded as public duties. The East India Company, which 
planted an empire, is an illustration of such a corporation. 



WILLIAMS COLLEGE. 

Prof. Charles J. Bullock. 
[Contributed.] 

The recent extraordinary movement in the -direction of in- 
dustrial consolidation is explicable, in part, by the unusually 
favorable conditions which the stock markets have afforded for 
floating the securities of almost any kind of corporate enterprise. 



PROFESSOR BULLOCK OF WILLIAMS. 121 

Even a casual examination of the financial papers suffices to 
sho,w that it is recognized in all financial circles that overcapi- 
talization has been the rule; and that the active demand of 
investors for corporate securities has given the promoters oC 
our recent combinations the opportunity to market large quan- 
tities of stock that represent nothing but the "good-witt" of the 
enterprises consolidated. Not only has the common stock of 
these companies often represented nothing but water, but also 
the bonds or preferred stock have been issued in amounts that 
largely exceed in many cases the cash selling price of the plants. 

But, apart from the inducements which the stock markets 
have offered for the formation of these combinations, there is 
undeniably a strong tendency toward industrial centralization. 
This is due to the desire to avoid certain losses and wastes of 
competition, and to the hope of securing a monopoly of the in- 
dustries in question. The economy resulting from production on 
a large scale is admitted by all economists; but it is a debatable 
question whether, outside of such industries as are natural 
monopolies, this economy continues to be realized up to the 
point where monopoly is reached. In other words, it is ad- 
mitted that production on a large scale is an economical neces- 
sity, but it is not admitted that a monopoly has great advantage 
in the work of production over a large enterprise that is big 
enough to secure maximum efficiency of plant. 

If some combinations have maintained for some years a 
practical monopoly in their respective industries, this fact may 
often be explained on the ground that discriminations in railway 
rates and accommodations furnished shippers have given tho 
would-be monopolist an advantage over the independent pro- 
ducer. In other instances the control over middlemen and job- 
bers exercised by some large combinations may be one chief 
cause of strength. Other explanations of a similar nature may 
possibly be advanced. 

For my own part I have been unable to come to a definite 
conclusion concerning the question of the permanence of the 
control which many of the combinations are now able to exercise 
over their respective industries; but I am inclined to believe that, 
while production on a large scale is going to continue, monopoly is 
not likely to continue outside of the field of natural monopolies, 
after some method is devised for doing away with the unfair 
and often illegal advantages which the largest combinations now 
enjoy. In some form or other, competition will be the con- 
trolling principle, except in those cases where natural monopolies 
are certain to prevail. 



122 TRUSTS OR COMPETITION? 

INSTITUTE OF -SOCIAL ECONOMICS. 

Professor George Gunton. 

Professor George Gunton, president of the Institute of Social 
Economics, New York, and editor of Gunton' s Magazine, ad- 
dressed the Chicago Trust Conference on "Trusts and the Public 
Welfare." The speaker practically confined himself to the pre- 
sentation p'f abundant proofs that modern large-scale production 
by large corporations and with large capital is in the line of eco- 
nomic development and is serviceable to society. Following are 
extracts: 

It must be remembered, first of all, that the trust, be it good 
or bad, is only one among a large number of experiments in in- 
dustrial organization, which the progress of the last fifty years 
has evolved. One of the marked features of the economic de- 
velopment of the century is the radical change that has taken 
place in the character of competing units. Under the primitive 
hand labor method, the competing unit was the individual. With 
the development of factory methods, the individual, as a com- 
peting unit, was superseded by partnerships, because they could 
more economically employ the new methods. With the growth of 
invention, partnerships were superseded by corporations. With 
the growing completeness of machinery and magnitude of busi- 
ness, corporations grew larger and larger, until the corporation 
is now the prevailing form in the most advanced countries. 

Nor is this limited to the capitalist side of industry. It is 
equally characteristic of the labor side. The competing unit in the 
labor market is no longer the individual laborer, but the group, 
the union. The factory system has made it impossible for in- 
dividual laborers to be competitors, because it is impossible for 
them to make individual contracts. In all matters pertaining to 
wages, hours of labor, conditions of work, whether by piece or 
by the day, it is the group and not the individual that is con- 
sidered. Each factory, and in most instances each industry, pays 
uniform wages, works the same hours, and has substantially the 
- same conditions, and when they are altered for one they are 
altered for all. In short, the progress during the nineteenth cen- 
tury has irrevocably established the group as the competing unit; 
the union as the unit on the labor side, the corporation as the 
unit on the capital side. 

It is not to be assumed, however, that large corporations are 
always wise, or good, or fair. They are born of the same spirit 



PROFESSOR GUNTON ON MONOPOLIES. 123 

{■ 

and partake of the same attributes as the small business venders. 
Their main ambition is to make profits. It is the duty of the state, 
therefore, to see to it that the conditions shall be such as to make 
dishonesty, unfairness, oppressive dealing, difficult and as im- 
possible as any other offenses against the welfare of the com- 
munity. This cannot be accomplished, however, by the petty 
nagging and corruption-creating license-granting proposed by Mr. 
Bryan. The federal government if it acts at all should act in 
exactly the other direction. It should surround industrial enter- 
prises with the maximum freedom and the maximum protection 
to all, and no uneconomic privilege to any. 

To this end it might be well for Congress to enact a law em- 
powering the government to grant national charters to corpora- 
tions, which should give them the right to do business over the 
entire territory of the United States, against which no state should 
have the right to interfere. This would be economic, in that it 
would give the market of the entire country to every business en- 
terprise. National charters could have the proper qualifications 
subjecting the corporations to a certain supervision and com- 
'pelling annual reports to be made. Second, it might also be 
provided that companies using a public franchise, like railroads, 
should not be permitted to make uneconomic discriminations in 
their rates of traffic, that they should be subject to public ac- 
counting, and that all contracts with shippers should be accessible 
to all other shippers. The general influence of publicity and in- 
spection by the national government, coupled with the corpora- 
tion's protection in its right to do business throughout the United 
States, would tend to create a wholesome influence around cor- 
porate conduct. While affording corporations the full support of 
the national government in their business rights, it would free 
them from the petty uneconomic nagging of partisan legislation in 
the different states. It would carry out the true idea of protec- 
tion—that the American market should be open to every American 
producer and that the interests of the laborers and the public 
be safeguarded by the national government; at the same time 
leaving the essential features of business to be determined by die 
free action of economic forces, which are more permanent, more 
sure and more equitable than the wisest statutory enactment 
would ever be. 

Professor Gunton made scarcely any reference to the central 
monopoly feature of trusts, but, on the other hand, said: "The 
whole question which this conference is called to consider is, 
What is the influence of large corporations upon public welfare?" 



124 TRUSTS OR COMPETITION? 

In answer to a request for his views on the monopoly element 
in the trust system, he has furnished the editor the following: 

THE QUESTION OF MONOPOLIES. 

The idea that trusts are monopolies is doubtless a large ele- 
ment in the public agitation. It is important, however, not to 
be carried away by mere terms and loose statements. It is uni- 
versally admitted that competition is indispensable to healthy 
industry. Monopoly is exclusive control that shuts out competi- 
tion. Now, are there any such monopolies? I do not know of any 
established industry, outside of the United States postoffice, which 
is a monopoly; that is, has no competition. There have been sev- 
eral efforts to secure a monopoly, through combinations and cor- 
ners, like the French Copper syndicate, and the Nail combina- 
tion, both of which were ignominious failures. As a matter of 
fact, it cannot be said that we have any great corporations that 
possess a monopoly. The Standard Oil, Carnegie, Sugar, West- 
ern Union Telegraph and the railroad companies are among the 
largest of their kind, but none of them have a monopoly in their 
line of business. s 

Again, there are two kinds of monopolies; one created by 
law and special privileges and the other created by superior 
competitive power, i. e., selling better goods, or cheaper, than 
anybody else. Of the special-privilege kind of monopoly there 
is none in this country. A monopoly that is secured by superior 
rivalry does not necessarily bring with it any of the evils so 
much dreaded, because if actual competition slackens, through 
the superiority of one competitor, potential competition is ever 
present in such cases. That is to say, so long as the right and 
opportunity to enter the field and compete for the business is 
open, if the existing enterprise uses its power abnormally to 
raise the price so as to get fabulous profits, capital, which is 
ever waiting for bonanza opportunities, will enter the field and 
compel it to disgorge part of its profits by lowering the price 
or else to do what is the same thing, buy out the new competitor. 
The latter is often the more expensive way. Self-interest, when 
at all enlightened, dictates the policy of keeping the profits suffi- 
ciently low not to tempt rival concerns to enter into competition. 

First, then, we have no monopolies in any proper sense of 
the term; second, even if we had there is no serious danger to 
public welfare it' the monopoly is not the result of legal privi- 
leges which close the door to new capital and new competitors. 
Of such we have none except in the case of railroads and concerns 
which have franchise privileges, and these ought to be under 
government supervision as to charges and rates, compelling pub- 



COMMENT ON PROFESSOR QUNTON'S VIEW. 125 

lie accounting and uniformity of charges to the same class of 
customers. 

The present rise of prices is no criterion by which to judge 
the monopolistic effect of existing large corporations, either new 
or old, because prices have risen quite as much, and in many 
cases more, in industries where the competitors are most nu- 
merous, as in those where they are the fewest. Witness the im- 
mense rise in the price of live stock, raw cotton, iron ore, pig 
tin, etc., as compared with that of petroleum, sugar, telegraph 
and railroad rates. The test of monopolistic influences on prices 
can only be found in the tendency of well-established concerns, 
and the evidence everywhere is that in those concerns which 
are called the most monopolistic, like the sugar and oil trusts and 
railroads, the prices have most steadily fallen. 

COMMENT. 

One who was disposed to criticise this view would probably 
say something like this: 

Professor Gunton first impliedly adopts an impossible defini- 
tion of monopoly as the term is used in the trust debate, and then 
with entire accuracy declares monopoly thus defined to be im- 
possible and non-existent. He discusses an absolute, theoretical 
or complete monopoly, while every student of economics and 
every man of affairs fully understands that in practice such a 
monopoly of any industry is like a perfect vacuum in physics, 
virtually impossible. Even Professor Gunton' s unfortunate ex- 
ample of an absolute monopoly, the United States postal service, 
furnishes a striking illustration of the fallacy here involved. In 
fact, the postal department to-day encounters at the hands of 
the banks, the telegraph, the express and railroad companies 
more and keener competition than does the Standard Oil, the 
Sugar Trust or the Western Union. Take our Alaskan seal in- 
dustry. This is a perfect example of the legal monopoly backed 
by the power of the United States government, yet foreign seal- 
ers compete both by land and sea. The form of monopoly which 
constitutes the central factor in our trust system is perfectly 
well known in the language both of business and of economic 
science as a virtual or practical monopoly. The qualifying word 
is usually omitted because unnecessary, just as vacuum, unquali- 



126 TRUSTS OR COMPETITION? 

fled, always means an approximate or virtual vacuum. Professor 
Gunton cites the Sugar Trust as being not a monopoly, yet when 
President Havemeyer, in testifying before the Lexow Commit- 
tee, was asked whether his company controlled the price of refined 
sugar in this country, he replied, "We certainly do, up to the 
importing point" This constitutes a virtual monopoly— the only 
sort the people, the economists, the legislatures and the courts 
are talking about, and the only sort the trusts aim to get and 
hold. It will occur to Professor Gunton on reflection that if a 
trust could escape the merited or unmerited odium and the possi- 
ble legal liabilities attaching to monopoly by simply pointing to 
some competition, however slight, in its field, it would infallibly 
see to it that such nominal competition was not lacking. Finally, 
the professor's virtual insistence that, even in the absence of 
present actual competition, monopoly is prevented by the possi- 
bility of future competition, is, of course, equivalent to saying 
that everywhere and always even a virtual capitalistic monopoly 
is impossible. This would seem to exhaust the possibilities of 
debate. 



OBERLIN COLLEGE. 

Professor T. N. Carver. 
[Contributed.] 

The first thing that ought to be said with regard to the 
"trust" system is that it is simply a new name for an old thing. 
The essential principle involved in the trust system is older 
than the modern factory system itself, and may be said to be a 
feature of every sound industrial system. This principle is the 
adjustment of supply to demand by rational foresight rather 
than by irrational, uncontrolled competition. 

. Before the age of steam transportation and steam-driven 
machinery, markets were small. A few workmen in each neigh- 
borhood produced the goods for the supply of that neighborhood. 
They had no wider market and the neighborhood depended upon 
its own workmen for its supply of goods. Each neighborhood 
constituted a market. Under these conditions, it was compara- 
tively easy for the producers of any article to know the condi- 



PROFESSOR CARVER OF OBERLIN. 127 

tions of the market, to gauge the probable demand, and to cal- 
culate on the probable supply. But it would be a mistake to sup- 
pose that the workmen left the supply to take care of itself, 
regulated only by competition. The universal testimony is that 
always and everywhere, there was a mutual understanding 
among workmen and producers of "manufactured products, nor 
to produce in excess, nor to sell below a fair price. 

The advent of steam destroyed all that. Steam transporta- 
tion enlarged markets, so that one neighborhood could be sup- 
plied with products made half around the world. Steam-driven 
machinery enlarged production, so that most factories were com- 
pelled to find sale^for their goods in distant neighborhoods. It 
was no longer so easy for the producer to know the exact condi- 
tions of the market, and it seemed impossible to adjust the demand 
to the supply. As a result, a period of reckless, unrestrained 
competition s«t in. Each producer began invading the territory 
of other producers, and the salesmen of competing establishments 
trampled on each other's heels in their efforts to outsell one 
another. This was an unnatural condition and could not last. 
Sooner or later there was certain to be a return to the older 
principle of rational adjustment of supply to demand. But under 
the new conditions, that principle had to be worked out on a 
different plan from the old one. Instead of a large number of 
neighborhood markets, we now have a world market for most 
of our manufactured products. So, instead of a neighborhood 
understanding among a few producers, we now have a world, 
or at least a national, organization of producers to control the 
supply. We call such organizations trusts. 

Since such organizations are normal, and are following out an 
old principle, older than the modern industrial system, it is 
useless to contend against them. They are here to stay. If we 
have any quarrel at all, it must be with the modern transporta- 
tion system, and the modern factory system which brought the 
trust system in their train. 

This is not saying that trusts need no control. It is too soon 
yet for anyone to say confidently just how they are to be con- 
trolled, but one or two general propositions may be stated as a 
guide. In the first place, trusts contain possibilities in the way 
of economy of production and are therefore to be welcomed as 
readily as an improvement in machinery or any other improve- 
ment which increases the productive power of the country. In 
ihe second place, trusts, by their very size and influence, contain 
possibilities of evil in the way of discriminations and unfair 
devices against independent producers, besides vast power of 
political corruption. 

If these things are true, manifestly our duty is not to destroy 



128 TRUSTS OR COMPETITION? 

trusts, even if we could, for we would thus deprive ourselves 
of their economic advantages ; nor to let them go uncontrolled, for 
w£ should then retain all the evil possibilities; but to subject 
them to such control as will restrain and destroy their powers 
for evil, at the same time retaining their economic advantages 
in the way of economy of production. I do not know how this 
will be done, any more than I know just how an automobile ought 
to be constructed so as to get the most practical service out of it; 
but I am not yet willing that the world shall give up either 
problem in despair, for both are within the power of human 
ingenuity to solve. 



DARTMOUTH COLLEGE. 

Professor Frank Haigh Dixon. 
[Contributed] 

The present ' 'trust" problem in the United States concerns 
itself not with some peculiar form of organization, but with 
all monopolies or partial monopolies that temporarily at least 
are superior to the force of competition in the fixing of prices. 
They are but an expression of the force of self interest among 
business men, the culmination of a long and bitter struggle 
involving cut-throat competition, overproduction, and resultant 
depression, a depression intensified by the rapidly increasing 
use of large amounts of fixed capital. 

These organizations will for many years to come, doubtless, 
take a prominent place in our industrial life, and their methods 
deserve careful study. Unquestioned benefits have resulted from 
co-operation of large industries under skillful management. 
Economies have been introduced into all stages of production 
and efficiency materially increased. Stability has been promoted 
in the business world, and the dangers of industrial disturb- 
ances due to unregulated competition minimized. That laborers 
have been thrown out of employment in many instances cannot 
be regarded as a final argument against the trust efficiently 
managed, for any process which lowers the ultimate cost of 
production must work to the benefit of all. 

Any interference Avith this tendency toward consolidation 
should be regulative rather than destructive. The fixing o'f prices 
can be safely left in large part to the self-interest of the monop- 
olies. Prices cannot be made so high as to force consumers 
to the use of substitutes, nor can they reach the point where 
competitors will arise attracted by the unusual profit. The ease 
with which large manufacturing plants can be diverted! from 



PROFESSOR JOHN GRAHAM BROOKS. 129 

one kind of production to an allied line makes competition be- 
tween the large industries possible and acts as a deterrent of 
the rise of price. For such regulation as seems at present ueces- 
sary, we must look to the states rather than to Congress, for the 
power of the latter is limited to such products as become the 
subjects of interstate shipment. The most promising field for 
state interference is to be found in corporation accounting. If 
complete publicity of accounts were insisted upon in the case 
of all industrial corporations receiving charters from the states, 
many of the evils of privately controlled organizations would 
disappear of necessity and much groundless suspicion on the 
part of the misinformed be removed. Further regulation can 
be secured through the creation of state commissions clothed 
w r ith powers sufficient to safeguard the -people's interests. To 
them could be intrusted, if necessary, the determination of 
maximum rates and maximum dividends. Whether more vigor- 
ous interference that would lead to the destruction of the 
trusts or to their virtual absorption by the states will be neces- 
sary depends upon the policy adopted by the monopolies them- 
selves. Such radical action cannot, however, be defended in 
the light of present conditions. 



UNIVERSITY OF CHICAGO. 

Professor John Graham Brooks addressing the Liberal Club of Buffalo. Nov. 

16, 1899. 

The trust proper was in- a very special sense of American origin. 
What we are now dealing with is not local in its beginnings, but 
has been slowly appearing for half a century wherever competition 
had brought about specific dangerous results. It is indeed a great 
aid to clearness if we see at once that all which is essential to the 
new combinations is in no sense new. Proudhon, in his "Economi- 
cal Contradictions," written before 1846, discussed with extraordinary 
acuteness the phenomenon which now frightens us. The ablest de- 
fenders of trusts are now eager to distinguish between uses and 
abuses. Proudhon, in his attack upon competition, ridiculed the 
economists, Blanqui and Rossi, for their attempt to save an un- 
restrained competition by attempting to eliminate its abuses. The 
tendencies to check competition by organization in France about 1840 
created much dismay. It had already grown clear that a complete 
let-alone policy was not workable among the Paris cab drivers, and 
the French publicist, M. Troplong, insisted that the necessity of con- 
trolling competition in this instance was likely to be almost a 
solitary exception. Yet, already an unfettered competition in the 
coal industry had, in certain parts of France, been found impossible 



130 , TRUSTS OR COMPETITION? 

and organization had already begun. From that time to the present, 
anything like complete competition has been more and more restricted 
in hundreds of commercial centers in Europe. It would probably 
be safe to say that at the present moment in Europe there are 1,000 
organizations formed for the primary object of correcting the abuses 
of competition. They are formed by the score in Germany. Austria 
and Hungary would not have anti-trust legislation if they were 
without the thing. What is extremely hopeful from this European 
experience is that legislation which forces a very strict responsibility 
upon directors and .managers has deprived these aggregations of 
capital of those evils which alarm so many of our citizens. 

The chief perplexity which the student of the trust must feel 
is in the undeveloped character of the movement which the new 
organization represents. The most searching tests of utility we can- 
not apply for the reason that no test is yet at hand. Do the new 
organizations raise prices or lower them? Mr. Bryan affirms that 
even if they lower the price, he would still oppose them as an 
evil. This view must, I think, be exceptional, but it is surely very 
vital to know the general bearing of these new forces upon prices. 
If the tendency be to lower them, a large part of the objections 
raised would disappear. Yet so obvious a requisite to trustworthy 
opinion is nowhere to be found. Violent impressions are everywhere 
at hand, but they are valueless for careful discussion. Now this 
discussion, if it is to help us, has to assume one momentous fact, 
viz., the pitiful lack of anything like adequate organization over 
large areas of industrial life. Several great primary industries are 
in a state so chaotic as to affront our intelligence. The truth is, 
that the extreme clumsiness of organization, if the whole group is 
considered, has, thus far had no searching and adequate statement. 
One gets a hint of it when one sees at a single hotel in a small city 
five drummers competing against each other in selling the same prod- 
uct. I have heard one of the most successful business men in the 
East say: "If people generally knew how stupidly and wastefully 
much of the large business is carried on, we should become objects 
of ridicule." 

I submit, that to the extent these charges are true, the time is at 
hand for some kind of wide, thorough and effective reorganization of 
business; that is, for that portion of business into which a reckless 
competition ha.s brought so much confusion. Will anyone who sees 
these facts clearly doubt that the immense pressure of this necessity 
to check an unregulated fight is the real origin of the so-called trust? 
Many will, of course, fight it as they fought the partnership, as they 
fought the corporation, as they fought new machinery; and they 
will fight it with precisely the same results. The law can of course, 
bother them; it can make friction and delay; it can, perhaps, drive 
them from one place to another, because the needs of a world market 
are beneath them and these tidal forces are far stronger than any 
regulation in the statute book. If any political party is green enough 
to propose outright to smash them, it will have a great deal more 
leisure to regret it than it will know what to do with. The real 
problem, immediate and imperious, is how to regulate and guide 
the new force that stands merely for the latest stages of industrial 
growth. But the abuses, what of them ? That abuses run riot in this 



SUGGESTED REMEDIES FOR ABUSES. 131 

movement and are full of danger no one questions. The one practical 
test before us is to save, if we may, the uses which these combina- 
tions bring, and subdue, if we can, their abuses. Are the trusts 
dangerous? Yes, if the abuses are too strong for ws. If they can be 
brought under control, the trust will bring to us immense advan- 
tages. When competition in any industry has passed the danger 
line, the small concern or corporation is helpless to adapt production 
and distribution to market conditions. This has most fundamental 
importance for our theme. Fixed capital in the form of machinery 
has now so far developed that in many businesses seven months, at 
full speed, will fully stock the year's market. When the first flush 
of good business appears each concern drives at full pressure in 
order to get the utmost trade possible. The race becomes fierce and 
reckless among competing concerns until the market is overstocked 
and the old tragedy begins. Wages must be cut and men dropped 
and every wretched evil of long out-of-work periods is upon us. The 
small concern is, I say, helpless before this great danger. Combina- 
tion on an adequate scale alone can meet it. It can steady prices; 
it can steady the whole market both for capital and for labor. This 
conscious and calculated control is the next momentous step toward 
a rational industrial life. 

But the abuses are there. I will not deny their gravity, but I 
confidently believe that three steps may lead to' the removal of 
whatever is most threatening in these evils. First, as complete a 
publicity as that to which the national banks must now submit. 
Second, the removal of every special tariff privilege. Third, the end- 
ing of special railway favors. The tariff is not the primary cause 
of trusts, but no disinterested man can deny that the tariff may lend 
dangerously unfair privileges. It is a purely artificial advantage to 
which no business has a shadow of right. As the grave evil of 
railway discriminations are part and parcel of that habitual secrecy 
which is the most deadly evil in the trust, I shall lay chief emphasis 
•upon publicity as the most important of all remedies. Even the 
publicity which comes from wide and animated discussion is al- 
ready producing quite tremendous results. It is at the present mo- 
ment incomparably harder to float any sort of scheme because the 
underwriters have learned their lesson. The bankers will no longer 
lend unless the basis of the new organization can be sworn to be 
secure. Add to this, at the earliest possible date, the same sort of 
legal sanction for publicity that is now secured under the English 
law, and dangers like that of overcapitalization will be reduced to a 
minimum. 

We must assume in all clear discussion that the larger part of 
these ventures will speedily enough come to naught. The specu- 
lative element is so great that they will not stand the tests of the 
least severe experience. Several trusts have already failed and been 
reorganized tw T o and three times, repeating again our railway history. 
As the present boom passes away, the real test will appear of safe 
and cautious reorganization. We can then first judge the real 
strength of this movement. The immediate hope is that no movement 
ever held such promise of wide and thorough popular agitation. Gen- 
eral economic training always tells if it turns upon concrete events 
that have magnitude enough to stir the feelings of the imagination. 



132 TRV8T8 OR COMPETITION f 

This the trust movement does on a great scale. There is no blinking 
at the fact, competition has at last crowded us to the very edge of the 
most formidable industrial issues we have ever faced. Is the state 
eventually to take these monster combinations or are we to con- 
tinue them in private hands? If the chief abuses cannot be elimi- 
nated from private control; if politics is still exploited for personal 
gain; if city councils and state legislatures continue to be bought 
and sold as the interests of the trust may dictate, then state control 
in its most dangerous form will be thrust upon the American people 
all too soon. 



BUREAU OF ECONOMIC RESEARCH. 

Professor Edward W. Bemis. 

In many lines the tendency is for competition to become 
so keen as to leave no margin for interest on the necessary 
capital. But for their abuses the trusts might be looked upon 
with favor; but these abuses are serious: (1) They usually raise 
prices or prevent as rapid a fall as ordinary competitive con- 
ditions would secure. (2) The charge is w r ell proven against 
them of over-capitalization and consequent deception of in- 
vestors and the public. as to the amount of their exorbitant 
charges and as to their prospects for a continuance of high 
profits. (3) Much might be w r ritten of how the trust often clubs 
competitors until it drives them from the field. An ordinary 
competitive business has similar tendencies, it may be, but it 
is the trust w^hich boldly approaches a w r ould-be rival and de- 
clares that it will sell goods below cost until it ruins him unless 
he will join the great combine. (4) Most ominous of all is the 
danger in the trust to political purity and personal liberty. 
Whether we like it or not we are destined to see vigorous efforts 
of our law-making bodies to regulate trusts as they have already 
tried to regulate city monopolies of light, heat and transporta- 
tion. The latter effort has thus far had its most visible result 
in many cities in raising the price of the alderman and the leg- 
islator. It is to be feared that this and some malodorous events 
in the United States Senate are but a forecast of what awaits 
us in any really serious attempt to control the trust. The sup- 
port of the trust is so necessary to the bar and the press, its 
donations so eagerly desired by the university, the library "and 
the hospital, that freedom of speech is already endangered. 



PROFESSOR EDWARD W. BEMIS. 133 

REMEDIES. 
And what is to be done about it? 

I. The trust may be left alone, on the theory that it will 
soon go to pieces, or that the abuses will correct themselves. 
This seems hardly warranted by history thus far. 

II. To "smash the trust," even if practicable, which may be 
doubted, would deprive society of mighty possibilities for good. 
The evils of industrial evolution are never solved by going 
backward. 

III. Various methods of control of the trust may be adopted. 
Professor Jenks, for example, urges that stock exchanges should 
not be allowed to list any of the securities of the capitalistic 
monopolies without publishing most complete and sworn returns 
of the cost of construction and of the production of goods, capi- 
talization, etc. This suggestion is admirable so far as it goes. 

IV. Observing that England, under free trade, has witnessed 
a less rapid development of trusts than have we, and noticing 
further how the tariff has been perverted in many instances in 
America and Germany so as to protect combinations in exorbi- 
tant charges at home while they ship goods at reasonable prices 
elsewhere, we may demand, with Senator Pettigrew, the aboli- 
tion of the tariff on all specific articles which Congress shall 
decide to be controlled by trusts. Although this remedy would 
not reach many trusts, like oil or anthracite coal, it would be 
very effective in many cases. Mr. Havemeyer's recent attack 
upon the tariff as the friend of trusts will be recalled. 

V. Railroad discriminations, which are already contrary to 
law, are everywhere recognized as a powerful and unjust factor 
in the development of monoplies erf large capital. The Inter- 
state Commerce Commission, in its last report, declares: "There 
is probably no one thing to-day w T hich does so much to force 
out the small operator and to build up those trusts and monopo- 
lies against which law and public opinion alike beat in vain as 
discrimination in freight rates." This railroad problem is so 
serious that it will soon attract an attention that has never 
hitherto been given to it. Unless all signs fail, the time is com- 
ing when public regulation of railroads will give way to public 
ownership and operation, as has been the case recently in Switz- 
erland. The railroads regulate their regulators. They insidi- 
ously weaken or control commissions. The independent shipper, 
the average business man, is likely ere long to recognize that 
the door to the trust problem lies in a solution of the railroad 
question. 



134 TRUSTS OR COMPETITION? 

STATE SOCIALISM. 

VI. There is an increased number, though still a minority, 
of very intelligent people, who believe that the only way ulti- 
mately of treating the trust adequately is for all to join it, 
by public ownership and operation of oil refineries, match fac- 
tories, anthracite coal fields, distributing depots, etc., etc., just 
as in a somewhat indirect manner the people own many sugar 
refineries in the great province of Queensland, Australia. Prof. 
Bemis adds that while he finds himself in growing sympathy 
with such a solution, it seems still only a remote possibility. 
The people must first become habituated to public operation 
on a civil service reform basis, of city monoplies, the railroad, 
telegraph and express business, before they can ever widely 
undertake forms of business now absorbed by the trust. 

VII. There is no quick and royal road to the settlement of 
the trust question. Even Henry D. Lloyd, whose book on this 
subject is known the country over, when asked by a recent 
Congressional committee for a bill dealing with the trust prob- 
lem, replied that he had no legislation as j T et to propose. The 
trust problem, like the slavery question, will take a generation 
or more to settle, and like the slavery question will entail end- 
less trouble unless approached intelligently and with deep, con- 
scientious devotion to the public weal. 



UNIVERSITY OF WISCONSIN. 

Professor Richard T. Ely. 

[Contributed.] 

Through the courtesy of Prof. Richard T. Ely, the well- 
known authority on economic questions, relating especially to 
monopolies, state and municipal ownership, and allied topics, 
Mr. George Ray Wicker of the University of Wisconsin furnishes 
for this^work the following characterization of Prof. Ely's forth- 
coming volume, entitled "Monopolies and Trusts" : 

The whole discussion is probably the most complete and 
searching to be found. The first chapter contains an exhaustive 
critical analysis of the concept of monopoly, tracing the idea in 
the theory of economics from Senior to the writers of the present 
day, and bringing order out of the chaos of thought that sur- 
rounds the word in current economic, legal and popular discus- 
sions. Dr. Ely believes that the characteristic feature of monop- 



. PROFESSOR RICHARD T. ELY, 135 

oly is the absence of competition, and the consequent ability to 
control price. He expressly denies that scarcity creates monop- 
oly, reminding the reader that if monopoly could be thus pro- 
duced all economic goods would be monopolized, since their 
value is due to scarcity. Land, in the view of the aulhor, is 
not a monopoly, nor are the common surplus gains, as claimed 
fry some writers, to be regarded as monopoly gains. The author's 
very complete analysis of the idea of monopoly lends especial 
value to his definition. "Monopoly," in the language of the 
book, "means that substantial unity of action on the part of 
one or more persons engaged in some line of business, which 
gives exclusive control more particularly, although not solely, 
with respect to price." 

The second chapter treats of the classification and causes of 
monopolies. The most important classification, for scientific pur- 
poses, is that based upon the source of power or the cause. The 
author, from a commendable desire to avoid even the appear- 
ance of argument by epithet, has abandoned the term "artificial," 
formerly used to name one of these classes, substituting therefor 
the word "social." The other main class is that of "natural" 
monopolies. These latter, as is known to readers of his former 
works, are defined as resting back upon natural arrangements, 
as distinguished from social arrangements; the word natural 
being given a well-accepted connotation to signify that they 
have an origin apart from man's will and not infrequently in 
opposition to it. Social monopolies, on the other hand, arise 
from social arrangements, and express the will of society as a 
whole, through government, or of a section of society strong 
enough to impose its will upon society. The complete classifica- 
tion follows: 

A. Social. 

I. General welfare monopolies. 

1. Patents. 

2. Copyrights. 

3. Public consumption monopolies. 

4. Trademarks. 

5. Fiscal monopolies. 

II. Special privilege monopolies. 

1. Based on public favoritism. 

2. Based on private favoritism. 

B. Natural. 

I. Those arising from a limited supply of raw material, 
II. Those arising from properties inherent in the business, 

III. Those arising from secrecy. 



136 TRUSTS OR COMPETITION? 

Several other classifications are given by the author with 
the purpose of further clearing the field and arriving at a funda- 
mental understanding of the phenomena under discussion. 

The author, in his third chapter, treats of the "Law of Monop- 
oly Price,'' which he states as follows: "Other things being 
equal, the higher the general well-being, and the more readily 
wealth is expended, the higher will be the monopoly price." 
Considerable space is devoted to showing that, whereas the 
tendency of competition, in proportion to< its completeness, is. 
to produce uniformity of price from time to time, from place 
to place, from class to class, and from individual to individual, 
the tendency of monopoly is precisely the reverse, diversity in 
the absence of external pressure extending to the prices asked 
by monopolists from different social classes. This treatment is 
something new, I believe, in economic literature. Other points 
interestingly treated in the same chapter are the fixing of the 
"revenue point," the effect of various methods of taxation upon 
monopolies, the effect of purchasers' monopolies upon supply, 
the influence of surrogates or substitutes, and also of fashion or 
fad upon monopoly prices, and the bookkeeping of monopoly 
gains. 

Chapter IV, treating of "The Limits of Monopoly and the 
Permanency of Competition," is particularly interesting for its 
clear distinction between the fields of competition and of monop- 
oly in modern industry. It is worthy of special remark that the 
author, independently of the French writer, M. de Rousiers, has 
come to a similar conclusion—that very many so-called monop- 
olies are really not inherently so at all, but are only adjunct 
monopolies, drawing monopoly gains from their collusion with 
natural monopolies. The writer, though disclaiming any ambi- 
tion or power to prophesy, asserts distinctly his opinion that 
there does not now exist in the industrial field anything widen 
w T ould compel the socialistic conclusion that all. competition is 
self-destroying. In other words, he believes in the possibility 
of a permanent dualism- of competition and co-operation in the 
industrial world. 

Chapter V treats of the ^"Concentration of Production and 
Trusts." Under this caption the author deals with the phe- 
nomena of large-scale capitalistic production, and the vast in- 
dustrial combinations which have been so noticeable, particularly 
in America, within the last twelve or fifteen years. Here, again, 
the author asserts that there is a field in which competition is 
an inherent and natural characteristic, though he admits that 
this field is smaller than extreme individualists have been wont 
to assume. He denies the existence or the possibility of monop- 



A THREE-FOLD PROBLEM. 137 

oly arising solely from aggregation or capital or from such 
aggregation aided by superior business acumen in management, 
and claims that businesses of this sort, even when they present 
many of the features of monopoly, are really but parasitic 
growths, whose extra competitive gains must disappear with 
their removal from the support of the true monopoly to which 
they are attached. At any rate, they will always be explicable 
upon some other basis than that the competitive field tends to 
extinction. After a careful study of characteristic cases of con- 
centration of business, the author shows that there are certain 
large fields of industry, notably agriculture, in which concen- 
tration has not marked the past, and in which there is no evi- 
dence that such concentration will be more marked in the 
future. And yet, the author believes that the tendency has been 
very general toward a raising of both the minimum and the 
maximum points of efficiency of the business unit. 

Chapter V paves the way for the discussion of the evils of 
monopoly and of the remedies for them as contained in the 
last chapter. The author finds that there are really before the 
American people to-day three problems, that of monopoly, that 
of large-scale production, and that of centralization of wealth. 
After a discussion of the evils resulting from monopoly, and of 
certain suggested plans for their treatment, which he is unable 
to approve, he concludes with positive plans, which in his judg- 
ment intelligent social activity will adopt. These plans include 
public ownership and public management of natural monopolies, 
except those which depend upon the scarcity of raw -material, 
in which case he recommends public ownership with possibly 
private management. Other suggestions are for educational 
progress through conscious social effort, taxation of bequests, 
etc. He would have no laws aimed directly against large-scale 
production or industrial combination itself, but only such laws 
as would regulate great private corporations for the protection 
of purchasers, of employes, and of the public at large. Through- 
out the work, while the scientific and unbiased standpoint is 
everywhere evident, there is nevertheless an underlying feeling 
that the final criterion of judgment must be the public welfare. 



One view: The monopoly-trust system is an accomplished rev- 
olution, and therefore irreversible. The other view: The monop* 
oly-trnst system is simply an insurrection against both civil and 
economic law, to bo suppressed like any other insurrection. 



133 TRUSTS OR COMPETITION? 

MR. ROCKEFELLER'S POSITION 

John D. Rockefeller, president of the Standard Oil Company, in a 
written statement submitted to the Industrial Commission. Jan. 10, 
1900, thus summarized his views concerning trusts: 

"It is too late to argue about the advantage of industrial com- 
binations. Their chief advantages are: 1. Command of necessary 
capital. 2. Extension of limits of business. H. Increase of number 
of persons interested in the business. 4. Economy in the business. 
5. Improvements and economies which are derived from knowledge 
of many interested persons of wide experience. 6. Power to give the 
public improved products at less prices and still make a profit for 
stockholders. 7. Permanent work and good wages for laborers." To 
control trusts Mr. Rockefeller suggested federal legislation under 
which corporations may be created and regulated if that be possible. 
In lieu thereof he recommended state legislation, as nearly uniform 
as possible, encouraging combinations of persons and capital for the 
purpose of carrying on industries, but permitting state supervision, 
not of a character to hamper industries, but sufficient to prevent frauds 
upon the public. 

The other View : As shown in preceding pages (60 to 80) all the 
economic advantages named by Mr. Rockefeller are perfectly attain- 
able without resorting to monopoly, yet monopoly and not economy 
is the spinal column of every typical trust — like the Standard, for ex- 
ample. As President Hadley of Yale puts it, "a trust is an organiza- 
tion which makes increased economy of production a pretext for 
securing a monopoly of the market." As to Mr. Rockefeller's 
remedial suggestions: 1. Not one state would consent to his pro- 
posed transfer to the federal government of jurisdiction over the 
chartering of industrial corporations. 2. Concerning state supervision 
sufficient to "prevent frauds upon the public," the central fraud 
practiced upon the public by the trust system consists of, or grows 
from, the trust's capitalistic and uneconomic monopoly. Imagine the 
state of New Jersey, by which the Standard Oil Company, in com- 
mon with ninety-five per cent, of all trusts, is chartered, being asked 
so to "supervise" the operations of that corporation as to prevent 
it from crushing competition and monopolizing the market. The 
trus,t is not a passing skin disease of the industrial world, to be 
treated with soothing lotions of regulation. It presents a malignant 
tumor called industrial monopoly, which simply requires the knife of 
judicial surgery. The courts of the country, both state and federal, 
acting under the common law, public policy and existing statutes are 
quite competent and evidently disposed, to apply this heroic and 
effective remedy, as often as test cases are supplied by the people, and 
tha.t without injuring or hampering legitimate, non-monopolistic indus- 
trial combinations. 



CHAPTER IV. 
THE CHICAGO TRUST CONFERENCE. 



The National Conference on Trusts and Other Trade Com- 
binations, held in Chicago from September 12 to 16, 1899, proved 
to be a notable and very useful event. It was called together 
at the instance of the Civic Federation, a voluntary association 
of public-spirited citizens of Chicago. It consisted of some four 
hundred delegates, mainly appointed by the governors of about 
thirty states. Nearly all societies of national scope and mainly 
interested in economic and sociological questions, were specially 
represented by delegations. By invitation a number of the best- 
known professors of political economy connected with American 
universities were present, and several presented papers* which 
received the close attention of the conference and the gathered 
audiences. Among these were Professors Clark, of Columbia; 
Jenks, of Cornell; Adams, of Ann Arbor; Ely, of the University 
of Wisconsin; Folwell, of the University of Minnesota; John 
Graham Brooks, lecturer at the University of Chicago, and 
Bemis, of the Bureau of Economic Research. 

The central idea in summoning the conference was that it 
should be wholly non-partisan in its make-up and spirit and 
wholly educational in its purpose. This was happily carried out? 
in practice. No resolutions were adopted and no addresses to 
the country formulated, for this would have been wholly foreign 
to the plan of the gathering. While the debates were earnest and 
developed wide divergence of view among delegates, excellent 
temper prevailed, good manners ruled, and at the close it was 
apparent that most of the delegates were returning home having 

i39 



140 ' TRUSTS OR COMPETITION"? 

more respect for opposing opinions and at least a suspicion that 
there were two sides to the trust question. 

There was no well-defined alignment of delegates as cham- 
pions and enemies of trusts. While both extremes were repre- 
sented, all shades and grades of intermediate opinion were in 
evidence. It happened many times that prominent speakers 
would be well advanced in an address before one could decide 
where they were going to land. A rough attempt at classification 
of the delegates according to their attitude on the central theme 
would perhaps result thus: First, a group coming mainly from 
the West and South, and for whom Mr. YVooten of Texas and 
Hon. W. J. Bryan of Nebraska served as eloquent spokesmen. 
These came and went in the firm conviction that the combina- 
tion for doing away with competition, and the great corporation 
which aims at practical monopoly of an entire industry, commonly 
called a "trust," are evil and only evil, '"indefensible and in- 
tolerable," as Mr. Bryan put it, to be first restrained and then, 
as soon as practicable, annihilated. Second, at the other pole, 
was a group ably represented by W. Bourke Cock ran and Prof. 
George Gunton. the New York editor-economist, whose conten- 
tion is that the modern trust is distinctly an economic evolution, 
the logical and salutary outcome of past competition, to be 
welcomed and not assailed; that the trust has "come to stay,* 1 
and that its extirpation, even if it were possible, would be 
undesirable and disastrous. This sentiment was approved by 
one or two delegates from the central states, like ex-Governor 
Foster, of Ohio. The exponents of this view agreed, however, 
in conceding that legislation, state and federal, should provide 
such regulations as experience might show to be necessary to 
protect the public against possible abuse of the new power. 
Third, between these two positive groups appeared to be the 
majority of the delegates, some of whom had not made up 
their own minds, some of whom apparently did not care to go 
on record in a definite way at so early a stage of the country's 
great debate; many of whom had and expressed grave appre- 
hensions as to the outcome of the trust movement, while at 
a loss to discover any remedy, even if that movement should 



THTJ CHICAGO TRUST CONFERENCE. 141 

prove wholly bad. In private conversation with delegates one 
discovered that the instinctive opposition to the monopolistic 
side of the trust phenomenon was more general and more pro- 
nounced than the public speaking indicated. For the most part 
the professors of political economy who addressed the confer- 
ence confined themselves to stating the case, and pointing out 
both the benefits and the disadvantages of the new order, with- 
out balancing the account and pronouncing judgment for or 
against the trust. This will be observable in papers by Pro- 
fessors Jenks, Clark and Adams, the text of which is given 
herein. 

One marked peculiarity in the public debate, noticeable at 
the time and clearly shown in the published addresses, was this: 
Most of the outspoken advocates of the^ trust system studiously 
avoided the use of the word monopoly and all reference to the 
fact of monopoly as either substantially attained or aimed at 
by the typical trust, and almost without exception they carried 
the impression that anti-trust sentiment is simply opposition 
to large corporations or large aggregations of capital _ as such. 
On the other hand, none of those who could fairly be regarded 
as exponents of the anti-trust sentiment, made any attack what- 
ever on great industrial corporations as such or on the great 
concentrations of capital necessary to equip and run them. It 
was the monopoly feature and that alone which was the object 
of both denunciation and adverse argument. It is important to 
make this point clear, since, so far as the recent conference is 
evidence-, it shows that no war is being made on capital or on 
corporations as such, by any class or section; that it is only 
when great capital and the corporate form of organization are 
employed as a means of systematically monopolizing or at- 
tempting to monopolize an industry or a branch of trade that 
they encounter resistance and rebuke. The peculiarity here 
pointed out obviously detracted from the value of the debate, 
for to a great extent the two sides were firing at a wholly 
different target. As one spectator put it, Mr. Bryan and his 
colleagues attacked private monopoly, which the typical trusts 
certainly represent, and which nobody dared openly defend; 



142 fRUSTS OR COMPETITION? 

while Mr. Cockran and Professor Gunton vigorously defended 
"large corporations" and their necessary concentrations of cap- 
ital, which nobody accused. The attitude taken at the Confer- 
ence by the representatives of workingmen showed pretty clearly 
that organized labor cannot be relied on to oppose trusts with 
any approach to unanimity. 

That the conference has served to stir public thought, as 
few recent events have done, is evident enough. That it has 
wrought corresponding benefit is equally manifest. Among 
other things, it has developed the fact that no public question 
since the civil war of 1861 has taken so deep a hold upon all 
classes of our people in all sections of the Republic. 

We have endeavored to reproduce herein every fresh or 
important thought on the trust question which the conference 
developed, but so far as possible without repetition. At a gath- 
ering where each principal speaker aims to cover the whole 
subject instead of specializing, much duplication of utterance 
is inevitable. No attempt is made to follow the order of ad- 
dresses at the conference, but papers and extracts are grouped 
topically as far as practicable. 



PRIVATE MONOPOLY INDEFENSIBLE. 

Causes of the Trust System— Its Breeding Grounds in New Jersey and 
Delaware— Purposes of the Trust— Human Character More Important 
Than Dollars— The High-road to Aristocracy— Agriculture Under the 
Rule of Trusts— God-made Men Among Man-made Giants— Regulation 
and Suppression Demanded— A Remedial Plan Suggested. 

Hon. William J. Bryan, before the Chicago Trust Conference. 

I come this morning to discuss in your presence a great question 
— a question of growing importance to the American people. This 
trust principle is not new, but it is manifesting itself in so many 
ways and the trusts have grown so rapidiy that people now feel 
alarmed about trusts who did not feel alarmed three years ago. 
The trust question has grown in importance, because within two 
years more trusts have been organized, when we come to consider 
the capitalization and the magnitude of the interests involved, than 
were organized in all the previous history of the country, and the 



HON. WILLIAM J. BRYAN OX TRUSTS. 143 

people now come face to face with this question: Is the trust a 
blessing or a curse? If a curse, what remedy can be applied to 
the curse? 

ALL PRIVATE MONOPOLY INTOLERABLE. 

I start with the declaration that monopoly in private hands is 
indefensible from any standpoint and intolerable. I make no 
exceptions to the rule. I do not divide monopolies in private hands 
into good monopolies and bac| monopolies. There is no good monopoly 
in private hands. There can be no good monopoly in private hands 
until the Almighty sends us angels to preside over us. There may 
be a despot who is better than another "despot, but there is no good 
despotism. One trust may be less harmful than another. One trust 
magnate may be more benevolent than another, but there is no 
good monopoly in private hands, and I do not believe it is safe for 
society to permit any man or group of men to monopolize any article 
of merchandise or any branch of business. 

What is the defense made of the monopoly? The defense of the 
monopoly is always placed on the ground that if you will allow peo- 
ple to control the market and fix the price they will be good to the 
people who purchase of them. The entire defense of the trusts rests 
upon a money argument. If the trust will sell to a man an article 
for a dollar less than the article will cost under other conditions, 
then in the opinion of some that proves a trust to be a good thing. 
In the first place I deny that under a monopoly the price will be 
reduced. In the second place, if under a monopoly the price is re- 
duced the objections to a monoply from other standpoints far out- 
weigh the financial advantage that the trust would bring. But T 
protest in the beginning against settling every question upon the dol- 
lar argument. I protest against the attempt to drag every question 
down to the low level of dollars and cents. 

In 1859 Abraham Lincoln wrote a letter to some people in Bos- 
ton, and in the course of fhe letter he said: "The Republican party 
believes in the man and the dollar, but in case of conflict it believes 
in the man before the dollar." In the early years of his administra- 
tion he sent a message to Congress, and in that message he warned 
his countrymen against the approach of monarchy. And what was 
it that alarmed him? He said it was the attempt to put capital upon 
an equal footing with, if not above, labor in the structure of govern- 
ment, and in that attempt to put capital even upon an equal foot- 
ing with labor in the structure of government he saw the approach 
of monarchy. Lincoln was right. Whenever you put capital upon 
an equal footing with labor, or above labor, in the structure of gov- 
ernment you are on the road toward a government that rests not upon 
reason but upon force. Nothing is more important than that we shall 
in the beginning rightly understand the relation between money and 
man. Man is the creature of God and money is the creature of 
man. Money is made to be the^ servant of man— and I protest against 
all theories that enthrone money and debase mankind." 



144 TRUSTS OR COMPETITION? 

THE PURPOSES OF THE TRUSTS. 

What is the purpose of the trust or the monopoly? For when I 
use the word trust I use it in the sense that the trust means 
monopoly. And what is the purpose of monopoly? If you want to 
find out you can do so from the speeches made by those who are 
connected with the trusts. 

[Here Mr. Bryan quoted from an address delivered by Mr. 
Charles R. Flint, of New York City, in May, 1899. Mr. Flint has 
been prominently identified with the organization of several of the 
largest trusts.— Editor.] 

In explaining the merits of the trust system Mr. Flint said: (1) 
"We thus secure the advantage of large aggregations of capital' and 
ability. * * * Raw material bought in large quantities is secured 
at lower prices." 

We see. then, what is the first advantage. One man to buy wool 
for all the woolen manufacturers! That means that every man who 
sells wool must sell it at the price fixed by this one purchaser in 
the United States. Thus the first thing is to lower the price of raw 
material. The great majority of the people are engaged in the 
production of raw material and in the purchase of finished products. 
It is but comparatively few who can stand at the head of syndi- 
cates and monopolies and secure the profits from them. Therefore, 
the first advantage of a monopoly is to lower the price of the raw ma- 
terial furnished by the people to that combination. 

Mr. Flint next says: (2) "Those plants which are best equipped 
and most advantageously situated are run continuously and in prefer- 
ence to those less favored." The next thing is, after you have 
bought all the factories, to close some of them and turn out of em- 
ployment the men who are engaged in them — and if you will go about 
over the country you will see where people have subscribed money 
to establish enterprises, and where these enterprises, having come 
under the control of the trusts, have been closed and stand now as 
silent monuments to the wisdom of the trust system. (3) "In case 
of local strikes and fires, the work goes on' elsewhere, thus prevent- 
ing serious loss." Do not the laboring men understand what that 
means? It means that if the people employed in one factory are 
not satisfied with the terms fixed by the employer and strike, they 
can close that factory and let the employes starve while they go on 
in other factories without loss to the manufacturers. 

It means that when they have frozen out the striking employes 
in one factory and compelled them to come back to work at any 
price to secure, bread for their wives and children they can provoke 
a strike somewhere else and freeze them out there, and when a 
branch of industry is entirely in the hands of one great monopoly, so 
that every skilled man in that industry has to go to the one man 
for employment, then that one man will fix wages as he pleases and 
the laboring men will share the suffering of the man who sells the 
raw material. 

BRAINS NEED NOT APPLY. 

(4) "There is no multiplication of the means of distribution 
and a better force of salesmen takes the place of a large number." 
I want to warn y ou that when the monopoly has absolute control, 



HUMAN SELFISHNESS NEEDS RESTRAINT. 145 

brains will be at a discount, and relatives will be necessary to fill 
these positions. When there is competition every employer has to 
get a good man to meet competition, but when there is no competition 
anybody can sit in the office and receive letters and answer them 
when everybody has to write to the same house for anything he 
wants. There is no question about it. A trust, a monopoly, can 
lessen the cost of distribution. But when it does so society has no 
assurance that it will get any of the benefits from that reduction of 
cost in reduction of price. But you will take away the necessity ftfr 
that skill, for that brains. You will take away the stimulus that 
has given to us the quickness, the alertness Of the commercial trav- 
eler, and these men, these commercial evangelists who go from one 
part of the country to the other, carrying the merits of their respect- 
ive goods, will not be needed, because when anybody wants them all 
he has to do is to write to the one man who has the things for sale, 
and say, 'What will you let me have it for to-day?' 

(5) "Terms and conditions* of sale become more uniform, and 
credit can be more safely granted.'' He cannot only fix the price of 
what he sells, but he can fix the terms upon which he sells. You 
can pay cash, or, if there is a discount, it is just so much discount, 
and you have to trust to that man's generosity and his decision upon 
what is fair when he is on one side and you on the other. I have 
read these only as some of the advantages which a great trust mag- 
nate thinks will come from the trust. 

What is the first thing to be expected of a trust? That it will 
cut down expenses. What is the second? That it will raise prices. 
We have not had in this country a taste of a complete trust, a com- 
plete monopoly, and we cannot tell what will be the results of a 
complete monopoly by looking at the results that have followed 
the attempts to secure a monopoly. Pending such attempts the 
trusts have often lowered prices temporarily as a means of ridding 
themselves of remaining competitors. But when it has rid itself of 
competitors, what is going to be the result? My friends, all you have 
to know is human nature. God made men selfish. I do not mean to 
say He made a mistake when He did, because selfishness is merely 
the outgrowth of an instinct of self-preservation. It is the abnormal 
development of a man's desire to protect himself; but everybody who 
knows human nature knows how easy it is to develop that side of a 
man's being. Occasionally I find a man w T ho says he is not selfish, 
but when I do I find a man who can prove it only by his own 
affidavit. 

[Here the speaker illustrated the necessity of curbing the greed 
of great combinations by referring to the practice on Western farms 
of putting rings in the noses of swine. "So that while getting 
fat they may not destroy more than they are worth."] One of the 
great purposes of government is to put rings in the noses of hogs. I 
don't mean to say anything offensive, but we are all- hoggish. -In 
hours of temptation we are likely to trespass upon the rights of 
others. 

I believe in self-government. Why? Because in their sober 
moments the people have helped to put rings in their own noses to 
protect others from themselves and themselves from others in hours 

10 



146 TRUSTS OR COMPETITION? 

of temptation. And so I believe we must recognize human nature. 
We must recognize selfishness and we must so make our laws that 
people shall not be permitted to trespass upon the rights of others 
in their efforts to secure advantages for themselves. * * * 
And I believe the principle of monopoly finds its inspiration in the 
desire of men to secure by monopoly what they cannot secure in 
the open field of competition. 

CAUSES OF TRUSTS— SILVER DEMONETIZATION, TARIFF, ETC. 

I will not ask you all to - agree with me, but we have not mtt 
here as a body of men who agreed. We have met here as a body 01 
men who were seeking light and each ought to be. willing to hear 
what every other has to say, and each of us should desire the 
triumph of that which is true more than the triumph of that 
which he thinks may be true. 

Let me repeat that (1) the primary cause of these great combina- 
tions is the love of money and the desire to secure the fruits of 
monopoly; but I believe (2) that falling prices caused by a rising 
dollar have contributed to this desire and intensified it, because peo- 
ple with their plants, seeing the fall in prices and measuring the 
loss on investments, have looked about for some means by which 
they could protect themselves from this loss, and they have joined in 
combinations to hold up prices to protect their investments from a 
loss which would not have occurred but for the rise in the value of 
dollars and the fall in the level of prices. 

(3) Another thing that, in my judgment, has aided monopoly 
is a high tariff. Nobody can dispute tha.t a tariff law, an import duty, 
enables a trust to charge for its product the price of a similar for- 
eign product plus the tariff. 

Now some have suggested that to put everything on the free 
list that trusts make would destroy the trusts. I do not agree with 
this statement as it is made so broadly. I believe that the high 
tariff has been the means of extortion and that it has aided the 
trust to collect more than the trust otherwise could collect. But I 
do not believe you could destroy all trusts by putting all trust- 
made articles on the free 'list. Why? Because, if an article can 
be produced in this country as cheaply as it can be produced abroad 
• the trust could exist without the benefit of any tariff, although it 
-could not extort-so much as it could with the tariff, and while some 
relief may come from modifications of the tariff, we cannot destroy 
monopoly until we lay the ax on the root of the tree and make 
monopoly impossible by law. 

(4) It has been suggested that discrimination by railroads has 
aided the trusts. No question about it. If one man can secure from 
a railroad better rates than another man, he will be able to run the 
other man out of business. And there is no question that discrimi- 
nation and favoritism secured by one corporation against an- 
other producer and a rival have been largely instrumental in en- 
abling a desired monopoly to become practically a complete monopoly. 
Now that can be remedied by laws that will prevent this discrimina- 
tion, but When we prevent the discrimination, when we place every 



BREEDING GROUNDS OF TRUSTS. 147 

producer upon the same footing and absolutely prevent favoritism, 
monopoly may still exist. The remedy must go farther. It must 
be complete enough to prevent the organization of a monopoly. 

NEW JERSEY AND DELAWARE CORPORATION LAW. 

I do not believe the people of one state can rely upon the peo- 
ple of another state in this matter of corporate regulation, where a 
corporation organized in one state wishes to carry on business in 
other states. I might give you reasons, but I have here a letter 
that was sent out by a trust company of Delaware. It has an 
office in New York! and it is the most remarkable document on this 
subject that has ever fallen under my observation. It shows that 
in Delaware they adopted a law for the purpose of making Delaware 
more favorable to the trusts than New Jersey. The letter says: 

"The State of Delaware has just adopted the most favorable of 
existing general corporation laws— one marking a forward step in the 
evolution of corporations. It does not encourage reckless incorporation, 
nor permit the existence of wild-cat companies, but it furnishes at the 
least expense ample rights to stockholders and reduces restrictions 
upon corporate action to the minimum. 

"The enactment is not the result, as in the case of most states, of 
hesitating, halting, enacting, amending and repealing, but is a logical and 
systematic measure framed by a committee of able lawyers appointed 
by the legislature to examine the various statutes of the various states 
and prepare a bill which should embody the good and eliminate the 
the bad points of existing law. The law is based broadly upon that of 
the state of New Jersey and embraces all the beneficial provisions and 
safeguards found in the laws of that state. It is, however, in many 
respects, advanced far beyond New Jersey, and makes Delaware a much 
more attractive home for business corporations. 

"In the following salient provisions the Delaware and New Jersey 
laws are substantially identical. 1. Any three persons may organize a 
corporation. 2. It may engage in any lawful business excepting bank- 
ing. 3. Its existence may be perpetual or limited. 4. It may purchase 
and deal in real or personal property wherever situated, and to any 
desired amount. 5. It may be a mortgagee or a mortgagor. 6. It may 
conduct business anywhere in the world. 7. Stock may be issued for 
property purchased, and in Delaware for services rendered, and in the 
absence of fraud the judgment of the directors as to the value of such 
property or services is conclusive. 8. It may easily wind up its affairs 
and dissolve itself. 9. Its authorized capital stock need not be more 
than $2,000, and only $1,000 of this need be subscribed for. 10. The 
amount of capital stock which it may issue is unlimited. 11. It may file 
its certificate of incorporation and even begin business before any sum 
whatever is paid in. 12. It may have different classes of stocks, with 
different privileges or* restrictions. 13. The charter may be easily 
amended. 14. Only one director need be a resident of Delaware. 15. 
Capital stock may be easily diminished or increased. 16. The corpora- 
tion may be readily merged or consolidated into other corporations. 17. 
The incorporators may or may not limit the authority of the directors 
as to the liabilities." 

ADVANTAGES IN DELAWARE. 

And after giving us these points of similarity the letter proceeds as 
follows: "The Delaware law possesses the following advantages: 1. The 
original fee that we pay for incorporation is small— about three-quarters 



148 TRUSTS OR COMPETITION? 

of that of New Jersey. 2. The annual tax is small— one-half of that of 
New Jersey. Delaware is a small state and does not need very large 
revenue. 3. Stockholders and directors may hold their meetings wherever 
they please and need never meet in the state of Delaware. New Jersey 
stockholders must meet in that state. You see, it is a decided ad- 
vantage over the New Jersey law in that respect. 4. The original stock 
and transfer books, which in a New Jersey corporation must be kept in 
the state, may be kept in or out of Delaware, in the discretion of the 
company. 5. The examination of the books by intermeddlers is much 
more difficult under the Delaware law than under the laws of any other 
state. 6. The liability of 'the stockholders is absolutely limited when 
the stock has once been issued for cash, property or services. 7. Stock 
may be issued in compensation for services rendered, and in the absence 
of fraud in the transaction the judgment of the directors as to the 
value of such services is conclusive. 8. For certain classes of corpora- 
tions, as for instance, railroads, telegraph, cable, ele.ctric light, steam- 
heating power, gas-piping lines and sleeping car companies, the advantage 
is still more marked." 

[I wish we had some way of knowing what the additional advantages 
are, after having read the ordinary advantages.] "9. The annual report 
of a Delaware corporation is required to give no secret or confidential 
information. 10. The certificate need not show nor need public record be 
in any way made of the amount of stock subscribed by any incor- 
porator." 

I have read this letter to show you that where a state can gain 
an advantage from the incorporation of these great aggregations of 
wealth, it is not safe to place the people of other states at the 
tender mercies of the people of such a state as may desire to secure 
its running expenses from the taxation of corporations organized to 
prey upon people outside — to show how impossible it is for us in one 
state to depend for protection upon the people in another state; and 
while, as I say, I believe the people of every state should have the 
power to create corporations and restrain and limit or annihilate, 
yet I believe no complete remedy can be found for the trust until the 
federal government, with a power sufficiently comprehensive to 
reach into every nook and corner of the country, shall lay its hands 
upon these trusts and declare that they shall no longer exist. 

TRUST REMEDIES SUGGESTED. 

Now what can be done to prevent the organization of a 
monopoly? I rather think w T e differ more in remedy than we do in 
our opinion of the trust. I venture to guess that few people will 
defend the trust as a principle, or a trust organization as a good 
thing, but I imagine our great difference will be as to remedy, and 
I want, for a moment, to discuss the remedy. 

We have a dual form of government. We have a state govern- 
ment and a federal government, and while this dual form of govern- 
ment has its advantages, and to my mind advantages which can 
hardly be overestimated, yet it also has its disadvantages. When 
you prosecute a trust in the United States court it hides behind 
state's sovereignty, and when you prosecute it in the state court it 
rushes to cover under federal jurisdiction — and we have had some 
difficulty in applying a remedy. 

I believe we ought to have remedies in both state and nation, 



MR. BRYAN'S PROPOSED REMEDIES. 149 

and that they should be concurrent remedies. I submit, not neces- 
sarily as the best plan, but as a plan, the following: 

First, That the state has or should have the right to create 
whatever private corporations the people of the state think best. 

Second, That each state has, or should have, the right to impose 
such limitations upon an outside corporation as the people of the 
state may think necessary for their own protection. That protects 
the rights of the people of the state to say, first, what they shall 
organize in their state as a corporation, and, second, what they shall 
permit as a corporation to come from other states and do business 
in their state. 

Third, That the federal government has, or should have, the 
right to impose such restrictions as Congress may think necessary 
upon any corporation which does business outside of the state in 
which it is organized. In other words, I would preserve to the 
people of the state all the rights that they now have, and at the 
same time have Congress exercise a concurrent remedy, even to 
the point of prohibition, to supplement the state remedy. When the 
federal government licensed a corporation to do business outside of 
the state in which it was organized, it would merely permit it to do 
business in any state, under the conditions imposed by that state, 
in addition to the conditions imposed by the federal government. 
I would not take away from the people of the state, any right now 
existing, but I would have the federal government and the state 
government exercise the powers that may be necessary to annihilate 
the monopoly. And I believe it is possible to annihilate a 
monopoly, and when I hear gentlemen pessimistically destroying by 
their objections every suggested remedy, yet suggesting no other, I 
am reminded of those cheerful lines: 

"Plunged in a gulf of dark despair, 
Ye wretched sinners lie." 

FORM OF FEDERAL ACTION. 

As to the form which federal action shall take, this seems to 
me a complete method, but it may not meet your approval; 

That Congress should pass a law providing (1) that no corpora- 
tion organized in any state should do business outside of the state 
in which it is organized until it receives from some power created by 
Congress a license authorizing it to do business outside of its own 
state. (2) That such license should only issue upon these three 
conditions: 

I. That the corporation so applying for a license to do business 
outside of the state where incorporated shall have no watered 
stock. 

II. That there shall be thorough and regular publicity of all 
transactions and business of the company affecting the public 
welfare. 

III. That the petitioning corporation shall neither have nor 
attempt to secure a monopoly of any branch of business or of any 
commodity. [Violation of any such requirement to work a revoca- 
tion of license.] 



150 TRUSTS OR COMPETITION? 

As to the constitutionality of such a law my thought is that 
Congress should enact it and if it should be declared unconstitutional 
by the supreme court then I am in favor of so amending the federal 
constitution as to give Congress the power to destroy every trust in 
the country. 

I may be mistaken, but as I have studied the subject it has 
seemed to me that this method of dealing with the trusts would 
prove an effective method; but if you once establish the system 
and require the license, then congress can from year to year add 
such new conditions as may be necessary for the protection of the 
public from the greed and avarice of great aggregations of wealth. 

OVERCAPITALIZATION-WATERED STOCK. 

As to watered stock I don't agree with those who say it is a matter 
entirely immaterial whether a corporation has water in its stock 
or not. It is true that in the long run — if you are able to run as 
long as the run is! you may squeeze the water out of the stock, but 
during all that time the harm goes on; during all that time the trust 
demands the right to collect dividends upon capital represented by 
no money whatever. I do not believe any state should permit the 
organization of any corporation with a single drop of water in its 
stock. The farmer cannot inflate the value of his land by watering 
the value of that land. The merchant in the store cannot inflate the 
value of the goods upon his shelves. Why should the corporation 
be permitted to put out stock that represents no real value? There 
are instances in these trust organizations where the stock represents 
$4, yes as high as $12, of water to $1 of money. No man can defend 
stock that does not represent money invested, and only in the case 
of a monopoly can you secure dividends upon stock that does not 
represent money invested. You will find that if the watering of 
the stock is permitted the cry of the "innocent purchaser" is raised, 
and you will be told that you must protect the man who bought this 
stock. My judgment is thait no man can stand in the position of 
an innocent purchaser who buys stock in a corporation if that stock 
is not represented by actual money invested, because he can find 
out what the stock stands for if he will only investigate. 

But we had a case in Nebraska in which we tried to regulate rail- 
road rates, and one railroad in our state was capitalized and bonded 
for more than five times what it would cost to duplicate the road, 
and yet the judge held that in fixing rates and in determining what 
was fair compensation for the railroad we had to consider the 
watered stock as well as the actual value of that road, and when the 
case went to the supreme court the supreme court rendered a de- 
cision, which, while I cannot quote it in its exact language, was, in 
substance, this: That in determining what was a reasonable rate we 
had to take into consideration a number of things besides the present 
value of that road, measured by the cost of reproduction. 

PUBLICITY AND RENUNCIATION OF MONOPOLY. 

Congress can provide for publicity, and that annually or at 
such other times as the corporation shall make returns of its busi- 
ness and of its earnings, because, as has been well said, corporations 



NO WAR AGAINST CORPORATIONS. 151 

cannot claim that they have a right or that it is necessary to cover 
their transactions with secrecy, and when you provide for publicity, 
so that the public shall know just what there is in the corporation, 
just what it is doing and just what it is making, you will go an- 
other long step toward the destruction of the principle of monopoly. 

But I am not willing to stop there. I do not want to go one 
step or two steps. I want to go all the way and make the principle 
of monopoly absolutely impossible, or a monopoly absolutely im- 
possible in the industry of this country. And therefore, as a third 
condition, I have suggested that this license shall not be granted 
until the corporation shows that it has not had a monopoly and is 
not attempting a monopoly of any branch of industry or any article 
of merchandise. Then provide that if the law is violated the 
license can be revoked. I do not believe in the government giving 
privileges to be used by a corporation without reserving the right 
to withdraw them when these privileges become hurtful to the 
people. 

I do not go as far as some do and say there shall be no private 
corporations, but I say this, that a corporation is created by law for 
the public good, and it should never be permitted to do a thing that 
is injurious to the public good, and that if any corporation enjoys any 
privileges to-day which are hurtful to the public, those privileges 
ought to be withdrawn from it. # In other words, I am willing that 
we should first see whether we "can preserve the benefits of the cor- 
poration and take from it its possibilities for harm. [A delegate- 
Would you apply that to rich individuals, also? Say Rockefeller did 
it on his account.] >Mr. Bryan — We have not reached a point yet 
where an individual has been able to do harm, and in my judgment 
if we would abolish those laws which grant special privileges and 
which pick out men to be favorites of the government, no man by 
his own brain and muscle could ever earn enough money to be 
harmful to the people. 

My contention is that there is a vicious principle running 
through the various policies which we have been pursuing; that in 
our taxation we have been imposing upon the great struggling masses- 
the burdens of government, while we have been voting the privileges 
to the people who will not pay their share of the expenses of the 
government. I have claimed that when we collected our taxes we 
were making the poor people pay not only their own share, but the 
share of men whom they have no chance to meet at the summer 
resorts. 

Every unjust* tax is an indirect form of larceny. There are 
some people who have visible property, others who have invisible 
property, and the visible property is always taxed. The invisible 
property has too often escaped, and as the result the people owning 
visible property have paid not only their own taxes but the taxes 
that should have been paid by the owners of invisible property, and 
I have advocated an income tax because I have believed it the most 
just tax. I don't mention it to argue the subject here, because I 
want to avoid the discussion of questions that might be in the 
nature of partisan or political capital. But if this government will 



152 TRUSTS OR COMPETITION? 

go out of the business of picking out favorites and follow the doc- 
trine of equal rights to all and special privileges to no man I have 
no fear that any man by his own brain and his own muscle will be 
able to secure a fortune so great as to be a menace to the welfare of 
his fellow, men. 

[A voice: "What about the multimillionaires? What if they 
should get c6ntrol of all our industries?"] Mr. Bryan — First, 1 
would see if they die soon enough to relieve us of danger, and 
if they didn't I would see what was necessary to protect society 
from them! 

NATURAL MEN AMONG ARTIFICIAL GIANTS. 

Every trust rests upon a corporation. At least that rule is so 
nearly universal that I think we can accept it as a basis for our 
deliberation. And this brings me to what I regard a very im- 
portant branch of this subject. When God made man as the climax 
of creation, He looked uponJEis work and said it was good, and 
yet when God got through the tallest man was not much taller 
than the shortest, and the strongest man was not much stronger 
than the weaker. That was God's plan. We looked upon His work 
and said it was not quite as good as it might be, and so we made a 
fictitious mian that is in some instances a hundred times — a thousand 
times — a million times — stronger than God made man. Then we 
started this man-made giant out among the God-made pygmies. 
Now when God made man he placed a limit to his existence, so that 
if he were a bad man he could not do harm long, but when we 
made our man-made man we raised the limit on his age. When God 
made man He breathed into him a soul and warned him that in the 
next world he would be held accountable for the deeds done in the 
flesh, but when we made our man-made man we did not give him 
a soul, and if he can avoid punishment in this world he need not 
worry about the hereafter. 

My contention is that the law that created must retain control, 
and that the man-made man must be admonished every day of his 
life: "Remember now thy Creator in the days of thy youth.' ' We 
are not dealing with the natural man; we are not dealing with 
natural rights. We are dealing with the man-made man and arti- 
ficial privileges and so-called rights. What government gives the 
government can take away. What the government creates it can 
control, and I insist that both the state government and the federal 
government must protect the God-made man from the man-made 
man. 

CONFIDENT OF A RIGHT SOLUTION. - 

I have faith that these questions will be settled, and settled 
right, but I want to protest against this doctrine that the trust is 
a natural outgrowth of natural laws. It is not true. The trust 
is the natural outgrowth of unnatural conditions created by man- 
made laws. There are some who would defend everything, good or 
bad, on the ground that it is a part of destiny and you cannot in- 



GOVERNMENT BY SYNDICATE. 153 

quire into it. The fact that it is, proves that it is right; the fa^ct that 
it is, proves that it has come to stay, and the most potent argument 
that Was ever made in defense of a vicious system was not that 
it was right, and ought to stay, but that it has come to stay, 
whether you like it or not. I say that is the most potent argument 
that has ever been advanced in behalf of an error — it is here, it has 
come to stay, what are you going to do about it? 

I believe that in a civilized society the question is not what is, 
but what ought to be, and that every proposition must be arraigned 
at the bar of reason. If you can prove that a thing is good, let it 
stay, but if you cannot prove that it is good, you cannot 
hide behind the doctrine that it is here and you cannot 
get rid of it. I believe the American people can get rid" 
of anything they don't want and that they ought to get rid of 
everything that is not good. I believe the duty of every citizen is 
to give to his countryman the results of his conscience and his 
judgment and cast his influence, be it small or great, upon the right 
side of every question that arises, and that in the determination of 
questions we should find out what will make our people great and 
good and strong, more than what will make them rich. 

MONOPOLY BREEDS ARISTOCRACY. 

You have to decide upon a higher ground, and if you were 
to prove to me that a monopoly would reduce the price of all the 
articles we have to purchase I would still be opposed to it for this 
reason, which to my mind overshadows all pecuniary arguments: 
Put the industrial system of this nation into the hands of a few men 
and let them determine the price of raw material, let them determine 
the price of finished products and the wages of labor paid, and you 
will have an industrial aristocracy beside which a landed, aristocracy 
would be an innocent thing, in my judgment, 

I may be in error, but in my judgment a government of the 
people, by the people and #or the people will be impossible when a 
few men control all the sources of production and hand out daily 
bread to all the rest on such terms as the few may prescribe. I 
believe this opinion is the hope of the world. I believe the Declara- 
tion of Independence was the grandest document ever penned by 
human hands. The truths of that declaration are condensed into 
four great propositions: That all men are created equal, that they 
are endowed with inalienable rights, that governments are instituted 
among men to preserve those rights and that governments derive 
their just powers from the consent of the governed. Such a gov- 
ernment is impossible under an industrial aristocracy. 

GOVERNMENT BY SYNDICATE. 

Place the food and clothing and all that we eat and wear and 
use into the hands of a few people and instead of being a govern- 
ment by the people it will be a government of the syndicates, by the 
syndicates and for the syndicates. Establish such a government and 
the people will soon be powerless to secure a legislative remedy for 



154 TRUSTS OR COMPETITION? 

any abase. Establish sudh a system and the night before election 
the workman will be notified not to come back the day after election 
unless the policy of the trusts' candidate is successful. Establish 
such a government and instead of giving the right of suffrage to the 
people you virtually give the right of suffrage to the heads of mo- 
nopolies, with each man empowered to vote' as ma ay times as he has 
employes. I am not willing to place the laboring men of this country 
absolutely at the mercy of the heads of monopolies. I am not will- 
ing to place the men who produce the raw material absolutely 
into the hands of the monopolies, because, when you con- 
trol the price that a man is to receive for what he produced you con- 
trol the price that he is to receive for the labor in the production of 
that thing. 

THE FARMER AND THE TRUSTS. 

The farmer has no wages, except as the wages are measured 
by the price of his product, and when you place it in the power of the 
trust to fix the price of what the farmer sells, you place it in the 
power of the trust to lower the wages the farmer receives for his 
work; and when you place it in the power of the trust to raise the 
price of what he buys, you do the farmer a double injury, because 
he burns the candle at both ends, and suffers when he sells and 
again when he buys of the trust. 

Some people have tried to separate the laboring man who .works 
in the factory from the laboring man who works on the farm. I 
want to warn the laboring men in the factories that they cannot 
separate themselves from those who toil on the farm without in- 
viting their own destruction. I warn the laboring men in the facto- 
ries that when they join with the monopolies to crush the farmer, as 
soon as the farmer is crushed the laboring man will be crushed, and 
his ally will be destroyed, and in a test of endurance the farmer will 
stand it longer than the laboring man. I come from an agricultural 
state — one- of the great agricultural states of this nation — and I 
want to say to you that while our people are, I believe, a unit 
against the trusts, we can stand the trusts longer than the laboring 
men ; we can stand all the vicious policies of government longer than 
the laboring man can. 

The farmer was the first man on the scene when civilization 
began and he will be the last to disappear. 

But, my friends, why should we try to see who could hold out 
the longest in suffering? Why try to see who can endure the most 
hardships and yet live? Why not try to see who can contribute 
most to the greatness and to the glory and to the prosperity of this 
nation? Why, those who can contribute most should make this 
government what the fathers intended it to be. For 100 years this^ 
nation has been the light of the world. For 100 years the best of 
all nations have looked to this nation for hope and instruction. Let 
us settle these great questions that we have; let us teach the 
world the blessing of a government that comes from the people, 
and let us show them how happy and how prosperous people can be. 

I believe the doctrine that God made all men of the same dust 
and did not make some to crawl on hands and knees and others to 



EON. WM. DUDLEY FOULKE. 155 

ride upon their backs. We recognize that man has his rights and 
can defend them; and he must also respect the rights of others. Let 
us show what can be done when we put into actual practice those 
great doctrines of human equality and of equal rights and make this 
government what the fathers intended, so that we shall lead the 
world step by step onto higher ground. 



HON. WM. DUDLEY FOULKE. 

The question we are called to consider dwarfs in importance 
all other issues now before the country or the world. When 
•Dreyfus shall have been forgotten, when the war in the Philip- 
pines shall be, regarded only as one of the episodes of history, 
when men shall speak no longer of the tariff or the currency, 
the present era may well be remembered by coming generations 
as the epoch of that great organic change when the system of 
competition began to give way to the system of co-operation— 
a change leading inevitably (w T hether for good or ill we cannot 
clearly see) to the radical reconstruction of the world's industrial 
and social life. 

The organizers of the trusts, in their eagerness to put a stop 
to wasteful and ruinous competition, have been rushing in head- 
long haste to realize the immediate, personal benefits of in- 
creased economy and power offered by these great unions, with 
little regard to ultimate consequences. Their thought has been, 
"After us the deluge." 

On the other hand, those who have been thrown out of em- 
ployment or ruined by the suppression of competition, together 
with that vast conservative element in our population which 
fears a leap into the dark, are lifting their voices in warning, and 
some, it may be added, in rather indiscriminate abuse. 

Political and Social Effects.— But the political and social 
effects of monopoly are far more menacing to society than its 
economic results. The great consolidations of capital are fast 
seizing the avenues of power that lead to the control of the 
Government and are seeking to rule the states and the nation it- 
self, often through procured legislatures and corrupted officials. 
Yet the monopolies are here. A great part of our manufacturing 
industries and a considerable fraction of our commercial business 
is already in their hands. When the Sugar Trust controlled 98 
per cent of the production of the country it was idle to say that 
the remaining two per cent could offer any substantial compe- 
- tition. And the present tendency is for all these great organiza- 
tions to draw closer and closer to the ideal of a perfect monopoly, 



156 TRUSTS OR COMPETITION? 

though none of them have yet entirely reached it. If this present 
tendency remains unchecked, it is easy to see that each of the 
important branches of manufacture will be controlled by a single 
company. And the people naturally look forward with alarm to 
the time when in each branch of industry a single monopoly 
shall control the trade. 

Nay, the combining and reeombining will not stop even here. 
A single company is likely to control many branches of industry. 

The department store already absorbs nearly all the branches 
of retail trade. The great anthracite coal fields are practically 
under the control of two or three railway companies, and it is 
impossible to say that even the wheat fields of the Northwest, or 
the cotton fields of the South may not in the future share the 
same fate. The railroads, indeed, have undertaken many 
branches of industry as feeders for their great lines. The sum- 
mer hotel business seems to be passing largely into their hands 
as well as much of the grain elevator business, shipping, and 
other agencies of transportation. Who can say, indeed, what 
branch of industry may not be the feeder for a railway? 

As the great nations of the globe are becoming fewer and 
fewer, until now there are four or five at most, which control the 
future destinies of mankind, so the tendency of industrial organi- 
zations to aggregate is such that I can see in fancy four or five 
great companies which shall control practically the whole output 
of the country. 

A Socialistic Possibility.— Nay, since all industries are now 
indissolubly united, who can say (if the present movement should 
go on unchecked) that a single gigantic organization may not 
sometime control all production. This will be a form of social- 
ism and yet it may not be at all the socialism which fancy pic- 
tures in the dreams of the disinherited. 

Socialism may take many forms. The industrial organization 
of society may be for a time separated from its political organi- 
zation, but not permanently. Socialism does not necessarily 
mean equal shares to all in the joint property, or returns. These 
may be divided according to the services rendered or capital con- 
tributed either by the actual stockholders or their predecessors 
in title, just as private property to-day consists of that which a 
man earns and acquires as well as that which has come to him 
by gift or inheritance. It is, however, clear that the mass of the 
-people must have a sufficient interest in the co-operative com- 
monwealth to give the structure a broad base and prevent its 
toppling over. That it should remain in possession and control 
of only a few millionaires would not long be tolerated. And yet 
equality might be found as impossible in a co-operative state as 



HON. BOURKE COCKRAN, 157 

under the competitive system. So long as men are unequal in 
skill, industry and ability, the greatest prizes will always be 
won by comparatively few. 

The numerous laws which have already been enacted to 
break up trade agreements, pools, and technical trusts, have 
been ineffective. They have resulted in the organization of larger 
corporations, which are more permanent and more dangerous 
in their character, than the things which are prohibited by 
statute. If it were possible to break up these corporations, 
which may well be doubted, the men who' compose them would 
unite, perhaps, in partnerships or other forms of union to ac- 
complish the same objects. If you break up these there are in- 
finite varieties of organization which will take their place. 
The tendency of men to associate for the accomplishment of a 
common purpose is like the law of gravitation, and no statute 
will be found effective^ against such a tendency. 

The present consolidating tendency of our industrial life 
is largely beyond our control. We can guide it only a little way 
upon its journey, for the most part we shall have to stand aloof 
whether we will or no, and see the ^salvation of the Lord. And 
if better things develop than we dream, it will not be the first 
instance in the evolution of our race where good has been the 
final outcome of apparent evil, and where the agencies which 
seemed to portend disaster and ruin, have been in the end 
the ministers of prosperity and happiness. 



BOURKE COCKRAN. 

The speech by Hon. Bourke Cockran before the conference 
was admirable as oratory, and contained much valuable mate- 
rial concerning the relations of labor to capital and other allied 
subjects, but it was only to a very slight extent a discussion of 
the trust question. For this reason, and because of its extreme 
length, it is not reproduced here. Those portions which bore 
directly upon the theme of the occasion may be thus summarized, 
without omitting any material part of Mr. Cockran's thought: 

The modern trust, in so far as it is characterized by monopoly, 
is an example of the survival of the fittest in trade — an example 
of legitimate victory for the winner in the great competition 
which was open to all. Where many compete one must prevail, 
and the so>-called trust thus stands for industrial predominance 
through excellence. There can be no harm from that form of 
monopoly which results from one competitor excelling all others. 



158 TRUSTS OR COMPETITION? 

That excellence is itself proof that the one excelling is render- 
ing to society a better service than any rival was able to render. 
So long as the excellence continues the trust manifesting it will 
survive. When that excellence ceases or materially abates, com- 
petition "will spring up and the trust will be simply one of many 
corporations, with no element of monopoly. The same law ap- 
plies in trade as in professional life. One physician or lawyer 
may through ability and proficiency in his profession secure 
a practical monopoly of the best practice. This is his legitimate 
reward for excellence in the competitive race. As no one pro- 
poses or believes it just that the proficient lawyer or doctor 
should be handicapped or held back in order to give opportunity 
for the lawyers or doctors of less ability or energy, so in indus- 
try and trade it would be unjust and inexpedient* to the last 
degree to hold back the successful competitor in the interest of 
the unsuccessful. If it can be shown that any trust enjoys mo- 
nopoly through any other cause than its own competitive power, 
its industrial excellence, let that cause be removed. If the tariff 
or railroad discriminations furnish the occasion, let this wrong 
be corrected, but do* not make war upon that industrial excel- 
lence which enables one large corporation, called the trust, to 
surpass all others. We cannot afford to refuse the prize to him 
who wins it in open competition, and the trust is simply com- 
petition at the end of the race. 

COMMENT. 

The other view would be this: Nobody is complaining of mo- 
nopoly resulting from industrial excellence. Not one typical 
trust owes its monopolistic position and advantage to such a 
cause. All have achieved their predominance through capitalistic 
combination and absorption — a thoroughly unscientific, uneco- 
nomic and, as many contend, unlawful process. It is the differ- 
ence between true sportsmanship and pot-hunting. 



GOVERNOR PINGREE OF MICHIGAN. 

In all that has been said about trusts scarce a word has been 
spoken or written from the standpoint of their effect upon society. 
The almighty dollar seems to be the standard for measuring all 
things. Everybody has been asking whether more money can be 
made by trusts than by small corporations and individuals; whether 
cost of production will be increased or decreased; whether investors 
will be benefited or injured; whether the financial system of the 
country will be endangered; whether we can better compete for the 



ATTORNEY-GENERAL CROW. 159 

world's trade with large combinations or trusts; whether prices will 
be raised or lowered; whether men will be thrown out of employ- 
ment; whether wages will be higher or lower; "whether stricter 
economy can be enforced, and so on. I believe that all these things 
are minor considerations. I think it is of far greater importance to 
inquire whether the control of the world's trade, or any of the other 
commercial advantages claimed for the trusts, are worth the price 
we pay for them. The strength of our republic has always been in 
what is called our middle class. This is made up of manufacturers, 
jobbers, middlemen, retail and wholesale merchants, commercial 
travelers and business men generally. It would be little short of 
calamity to encourage any industrial development that would affect 
unfavorably this important class of our citizens. Close to them, 
as a strong element of our people, are the skilled mechanics and 
artisans. They are the sinew and strength of the nation. I favor 
complete and prompt annihilation of the trust — with due regard for 
property rights, of course. I care more for the independence and 
manliness of the American citizen than for all the gold or silver in 
the world. It is better to cherish the happiness of the American 
home than to control the commerce of the globe. The degrading 
process of the trust means much to the future of a republic founded 
upon democratic principles. A democratic republic cannot survive 
the disappearance of a democratic population. 

T. B. Walker, Minneapolis. — It has been proposed to me several 
times to organize a lumber and timber trust. A trust that can 
handle and control the supply of raw material has a better chance 
for permanency than one where the supply of raw material can be 
produced by competing producers to an unlimited extent. It was 
urged upon me that the pine timber of Minnesota and northwestern 
Wisconsin might be put into a deal where the lumber prices could 
be controlled to such an extent that the trust could afford to pay 
the timber owners a large price for their timber, mills and lumber 
stock and very readily add enough to the lumber price to cover the 
excessive purchase price, and to make dividends on the enormous 
amount of stock that would thus be issued. It was the general 
proposition to pay us as timber owners a large sum of money, if 
wanted, and a large block of stock, and it was intimated that a por- 
tion of the promoter's share would also be paid over to us! The only 
possible object in proposing to form this trust was to put so much 
of the timber together that the prices could be controlled and main* 
tained at a high figure. If it had been shown to these promoters and 
investors that prices could not be controlled by means of the control 
of the supply and the limitation of the output, they would not have 
considered the deal for a moment at even much lower figures than 
they had proposed to pay. A similar effort was made to draw the 
Minneapolis flouring mills into a trust, but with like failure. 

Hon. E. C. Crow, Attorney-General of Missouri. — It has been 
assumed that there is in the country a large element opposed to 
corporate organization and corporate wealth. On behalf of myself 
and the people of my state I wish to say that no such antagonism 
exists. But this trust question is a two-sided one. It will not do 
for the opponents of the trust to say that all trusts are evil and 
that no beneficent results flow from them. That proposition cannot 



160 TRUSTS OR COMPETITION? 

be substantiated and should not be assumed. I believe that upon 
reflection all will concede this proposition to be true: That very 
frequently the trust puts the product into the hands of the con- 
sumer at a lower price than formerly was paid for it, but that is not 
the gist of the proposition. The question is, shall the power be 
given to the organized corporate trusts of this country to fix and 
determine prices at their own sweet will and pleasure and not have 
prices regulated by the natural law of supply and demand? Therein, 
I believe, lies the kernal of the proposition. As to the remedies: 1 
don't believe in paternalism; I don't believe in interfering in busi- 
ness affairs any more than is necessary. I believe in the greatest 
freedom, but I believe we can apply a remedy that will act as a pre- 
ventive. It is to appeal to that selfish part of human nature which 
says, we will protect ourselves, our homes and our families. I would 
do it by enacting for all of the United States, by the state govern- 
ments, a law that would declare that any holder of stock in a railroad 
or other corporate business occupation shall be liable to the same 
extent that a co-partner is liable. I would have these partners con- 
sidered in one state on the same basis as the partners in any other 
state — giving them equal opportunity and equal responsibility. That 
method, I believe, would regulate and control in a harmless manner 
the business interests of this country. 



GOV. GEORGE W. ATKINSON. 

Gov. Geo. W. Atkinson of West Virginia.— If the advocates of 
and participants in the trusts could satisfy the minds of the masses 
upon the following propositions, they would then have but a limited 
opposition in the years to come. 1. Will you, and can you, in all 
cases, as you claim, agree to furnish a better and cheaper article to 
consumers of all the necessaries of life covered by your trusts and 
combines? 2. What do you propose to do with the tens of thousands 
of middlemen now employed, who, of necessity, must lose their pres- 
ent positions?/ 3. What will become of the "small dealers" scattered 
over our country from Maine to Florida, and from the surges of the 
Atlantic to the sunset sea? What are you going to do with the 
large class of our fellow citizens who are now prosperous and happy 
in their present occupations? These are momentous problems and 
involve momentous results. 



The first step in solving a difficult problem is to become thor- 
oughly informed on both sides of it. 



CHAPTER V. 
THE QUESTION OF REMEDIES. 

Are Any Remedies Needed?— If So, Shall They Cure by Regulation or 
Removal?— Concerning Regulation and Palliation— Impracticability of 
Most Proposed Remedies— Twenty-one Suggestions from Eminent 
Sources— Analysis of the Leading Ones— Plans of Mr. Bryan and 
Bourke Cockran— Concerning Remedy by Trust Disintegration— Ex- 
tirpation Less Difficult Than Regulation— Does the Common Law 
Permit Any Refuge for Private Monopoly?— Negative Answer Thus 
Far by the Courts— Legal Warrant of the Trust System. 



Any discussion of remedies necessarily assumes 
that something needs to be remedied; but obviously the 
choice of remedies willjdepend upon the nature and ex- 
tent of the confronting evil. There t)eing as yet no agree- 
ment on the latter point, there is naturally no general 
concurrence as to what remedies shall be adopted. The 
situation is not, however, by any means chaotic or un- 
hopeful. The problem is relatively new, and a little 
time is required to clarify the atmosphere. Besides, all 
proposed or possible remedies can be divided into two 
classes, according as they are suited to one or the other 
of two divergent views of the trust system and its evils. 
Thus it should not be difficult for the advocates of each 
of these views to unite upon a composite remedy made 
up from their own list of remedial possibilities. 

If the monopoly-trust is in fact a natural evolution, 
and therefore "here to stay," remedies should be simply 
regulative or palliative — somewhat after the manner of 
treatment already applied to the factory system, to pre- 

ii 161 



162 TRUSTS OR COMPETITION? 

vent unnecessary frictions and abuses. If, on the other 
hand, as many hold, the trust movement is an artificial 
and violent subversion of the historic system of competi- 
tion, and an attempt to substitute what Professor Clark 
terms, a permanent regime of monopoly not to be toler- 
ated, then the remedies to be devised and applied must 
look mainly to the disintegration of existing monopoly- 
trusts and the prevention of future ones. But even in 
the latter case there is no apparent reason why the 
friends and opponents of trusts, if both are sincere, 
should not agree upon a temporary code of regulation, a 
sort of modus vivendi, pending the preparation and ex- 
ecution by the latter of their more radical program, if 
they prove able to carry it out. 

In casting about for a remedy for any complex diffi- 
culty it is nearly as important to learn what cannot be, 
as what can be done. This process of elimination grad- 
ually narrows the field of search, concentrates atten- 
tion upon the uncanceled possibilities, and thus hastens 
a successful conclusion. In this indirect way the sug- 
gestion of even a totally impracticable plan may con- 
tribute somewhat to the final solution. 



REMEDY BY REGULATION. 

As to regulative measures: From the mass of most recent 
literature of the trust question, we have gathered the best- 
matured suggestions from nearly as many different sources, all 
of which are tersely given herewith. Each suggested remedy 
stands for a class or group of allied possible measures, hence 
comment on each serves for its group. Some of them shade into 
each other, and in forming a plan of trust regulation, several of 
them, if found satisfactory, could be utilized simultaneously 
without conflicting. It will also occur to anyone that certain 
classes of the proposed remedies might be utilized either for 
purposes of friendly regulation, or for the purpose of gradually 
wearing out and suppressing or disintegrating an obnoxious trust, 
according to the intent and wishes of those who enact and 
those who enforce the laws. 



REMEDY BY REGULATION. 163 

It is obvious at a glance that no one has yet digested any- 
thing approaching a definite and comprehensive scheme for 
regulating trusts and preventing or minimizing the evils which 
the people apprehend from them. It is no part of the present 
purpose to attempt to formulate from existing material, or other- 
wise, such a scheme. If needed that will come later, from the 
combined wisdom of all. But it is not unfit to point out such 
"elements of weakness or of strength in some of these numerous 
suggestions as force themselves upon the attention of_a student 
of the subject. 

In any similar list of suggestions on any difficult economic 
question a large proportion would probably be found on analysis 
to be wholly impracticable, of very slight effect, .or incredibly 
difficult of enforcement, for reasons which do not appear on the 
surface, and which did not occur to their authors. For example, 
certain classes of trust remedies proposed by those who are 
exclusively business men will be found to be unworkable, be- 
cause their authors had not sufficiently considered the economic 
principles involved. Both experts in political economy and men 
of affairs are prone to advocate measures which cannot com- 
mand acceptance, because they ignore those political necessities 
which lie back of all legislation, and which have a habit of up- 
setting the finest possible theories. Lawyers and public men 
oftenest err by reason of unfamiliarity both with economic prin- 
ciples and with details of practical business problems, but, on 
the other hand, they are likely to be well informed as to public 
opinion, and as to what measures can be and what ones cannot 
be enacted and enforced. They are also usually open-minded 
and quick to learn what economics and actual business require 
or will tolerate. 

A large section of all such propositions in the present in- 
stance have slight value because they can only apply to trusts 
hereafter to be formed. We cannot pass ex post facto, or retro- 
active, laws. But a great majority of all our industries which 
can be consolidated at all are already absorbed by trusts. Thus, 
no future legislation aimed at overcapitalization and similar cor- 
porate vices could apply to present trusts. They are proposals to 
secure the stable door after the horse is gone. Another part 
are useless in practice because they depend for their efficacy 
upon the voluntary co-operation of all the states in enacting and 
enforcing uniform repressive or regulative measures. Such uni- 
formity of action among forty-five states it is morally impossi- 
ble to secure, and the idea is not worth a breath. Even if the 
remaining forty-four states should agree, which is in itself in- 
conceivable, the concurrence of New Jersey could not be ob- 
tained. That state has chartered nearly alf the trusts, and her 



164 TRUSTS OR COMPETITION? 

annual revenues from taxation of trust franchises and stocks 
more than pay the entire cost t)f running her state government. 
She can be induced neither to sacrifice that revenue nor to im- 
pair or modify the corporate franchises that she has granted. 

Still another class of proposed remedies may as well be 
erased from the list for the reason" that their application involves 
radical changes in the relative scope of state and federal powers. 
It is useless to run up against an immovable barrier, and the 
people, north and south, will certainly veto any material enlarge- 
ment of federal authority at the expense of the dignity, im- 
portance and autonomy of the states. If need be, they would 
rather suffer some grave inconvenience along other lines than 
to yield a point here. Besides, there is a widespread suspicion 
that to lodge with Congress unlimited discretionary power over 
the now gigantic capitalistic interests represented by the trust 
system, would be disastrous— to Congress. This is not saying 
that the people will object to any and every enlargement of the 
power of Congress, over interstate commerce, for example, but 
radical changes in the national constitution along the line of 
increasing federal authority in affairs internal to the several 
states cannot be expected. 

Remedies have no prospect of adoption which threaten to 
do more harm thain good by opening the door to socialistic as- 
saults upon the sacredness of private ownership of property. 
On this rock Anglo-Saxon civilization proposes to stand— for a 
while longer. Suggestions are valueless which are not tied to 
some feasible and definite method of applying and enforcing 
them. Noble hopes and aspirations fired into the air do not 
stop or restrain monopolies. Finally, it is to be borne in mind 
that merely regulative measures for the most part aim at one 
trust evil only, namely, the tendency to oppress the public 
through high prices. Many believe there is a long list of more 
serious evils besides this, which cannot be reached by any 
regulative device. 

Here follow in outline the principal remedial proposals: 

TWENTY-ONE SUGGESTIONS. 

1. Ex-Governor Charles Foster and others: Let the government 
(state or federal?) levy on all trust corporations a special tax which 
shall absorb cr appropriate all net earnings above, say, six per cent, 
thus removing the principal inducement for raising price of product, 
depressing price of raw material or otherwise making exorbitant 
profits. 

2. Attorney-General Crow, of Missouri, and others: Limit the 
capital and purposes of corporation's, and make each shareholder 
personally liable as a partner. 



TWENTY-ONE SUGGESTIONS. 165 

3. Professor George Gunton, Vice-President Archbold, of the 
Standard Oil Company, and others: Let Congress charter corpora- 
tions which may, by virtue of their federal charters, do business in 
all the states without asking the latter's consent. 

4. Honorable William J. Bryan and others: Let Congress (by 
virtue of a constitutional amendment if this be necessary) enact that 
no corporation shall do business outside its own state, without first 
receiving a federal license, and even then only with the further con- 
sent of each state which it proposes to enter, such license to be 
granted only on condition that the petitioning corporation proves to a 
federal commission or court, first, that it is not overcapitalized; and 
second, that it is not, and does not seek to become a monopoly. 

5. Bourke Cockran, Henry Wallace, and others: Compel every 
corporation to make public, through a system of governmental exami- 
nations and reports or otherwise, every fact pertaining to its capitaliz- 
ation, assets, earnings, accounts and business which the public needs 
to know in order to protect itself against monopolistic wrong. 

6. Professor Bemis and others: Remove or lower the tariff on 
such goods as trusts manufacture. 

7. Professor Richard T. Ely and others: Prohibit all secret or 
other discrimination in railroad rates, thus preventing private monop- 
olies from being sustained by natural monopolies. If necessary let 
the nation own and manage the railroads. 

8. Professor David Kinley, chair of economics, University of 
Illinois, in "Progress:" "Remove from the trusts the adventitious 
aids supplied by natural and legal monopolies, then potential competi- 
tion will be a sufficient safeguard in connection with the following 
remedial measures: 1. Publicity of accounts. Every corporation 
which is engaged in interstate or quasi-public business, or is large 
enough to control an industry, should be subject to- supervision by an 
auditing commission. 2. Stock-watering should be prevented. This 
could be accomplished by a federal or state commission to regulate 
or supervise corporations. Capitalization should ndt be permitted 
beyond the market value of the plant. 3. The tariff should be re- 
moved from trust-made goods. 4. Our patent laws should be 
amended so as to prevent the suppression of new discoveries and in- 
ventions, and so as to afford the general public more advantage from 
them, and freer access to their use than it now has." 

9. Several Citizens: Let the public boycott trust-made goods 
wherever possible, organizing for this purpose, and give their patron- 
age and encouragement to new competitors. Let states or communi- 
ties, if necessary, maintain factories or industries, on business prin- 
ciples and a self-supporting basis, but for the public benefit. 

10. Senator Chauncey M. Depew: Trusts will' fall of their own 
weight, and industrial society will return to a competitive system, 
modified by that legitimate tendency toward large-scale production, 
which all recognize as existing. 

11. James B. Dill, corporation lawyer, New York, addressing 
the Chicago Trust Conference: "Pass the English law, which pro- 
vides that every holder of stock in a corporation, and "every person 
that buys and owns it, shall be deemed to hold that stock subject to 
demand in full for cash unless before the stock is issued a declaration, 



166 TRUSTS OR COMPETITION? 

describing the actual situation of the stock and financial condition of 
"the company, shall have been filed in the company's principal office 
and distributed in every country where the company does business. 
Thus the bad corporations would be killed for the reason that no- 
body would buy their shares." 

12. Professor John Bates Clark, chair of economics, Columbia 
University: Let Congress, so authorized by a constitutional amend- 
ment, prohibit discrimination in selling prices by corporations, thus 
preventing monopoly-trusts from underselling and destroying a com- 
petitor in a local field, or in certain lines of goods, while itself main- 
taining prices and making profits in the general field, or in other 
lines of goods. 

13. Professor J. W. Jento and others: Let the law require that 
before the stocks or bonds of any corporation can be listed on any 
stock exchange it shall file for public inspection at pleasure, a de- 
tailed statement of its capitalization, its actual assets and its net 
earnings. 

14. Senator W. E. Chandler: Let the federal government exer- 
cise its full repressive power through interstate commerce regula- 
tions; let state legislatures place such limitations on corporations by 
limiting their purposes, amount of capital, etc., as will render them 
incapable of acquiring monopolistic power. 

15. Judge Thompson of St. Louis, as quoted by F. W. Cook, in 
"The Corporation Problem," page 241: "If the operation of natural 
laws does not check the trust movement, the rerhedy is first to be 
sought outside of law, outside of government, by individual action, 
by counter movements of some kind. If capital combines against 
labor, 'labor must combine against capital. If manufactures combine 
against agriculture, agriculture must combine against manufactures. 
If the common carrier combines against the farmer, the manufacturer, 
the merchant and the laborer, then all must combine against the 
common carrier. Meet combination with combination; strike with 
strike; lockout with lockout; fight the devil with fire. Withdraw 
all governmental aid, in the form of protective tariffs or otherwise, 
from combinations which threaten to suppress competition in any 
trade. . . . Withdraw corporate franchises from every corpora- 
tion which attempts to suppress competition. ... If these means 
fail, level against the individuals — not against the corporations — the 
machinery of the criminal law." 

16. Optimists generally: Let the trusts alone. The universal 
and ^perpetual pressure of possible competition will prevent their do- 
ing any harm. 

17. Pessimists generally: Let the trusts alone. They art 
stronger than society, stronger than the government, and can defeat, 
any movement brought against them. Opposition is a waste of time. 
We must adjust ourselves to the new dispensation as we do to any 
other inevitable and permanent evil. 

18. Secretary of State John Hay: Let the Republican party 
attend to the trusts. 

19. John II. McLean: Place, in power a political party honestly 
pledged to deal conclusively with the trust system. 

20. Springfield Republican: Let all states adopt the Massachu- 



PROPOSED REMEDIES ANALYZED, 167 

setts rule of permitting no corporation to issue stocks or bonds in 
excess of a fair and officially approved valuation of assets. 

21. Socialists generally: Let society or the government assume 
ownership and management of all industries, beginning with those 
monopolized by trusts. 

COMMENTS. 

1. Concerning all proposed remedies which contemplate a legal 
limitation of trust profits, by means of a special tax on dividends or 
otherwise, as suggested by ex-Governor Foster and others, reference 
is made to the remarks on this subject by President Hadley of Yale 
University, given herein under the title, "Opinions of Economists." 
He shows how readily such a tax could probably be evaded or de- 
feated by the trusts. Also such a measure, however enacted, would 
probably require an amendment to the federal constitution, for in 
one way or another the validity of any such tax, or appropriation 
of corporate earnings, would be tested by the Federal Supreme 
Court. It would be next to impossible, except as a last resort, to 
secure such an amendment because the people would fear it might 
be the entering wedge to an impairment of property rights generally. 

2. Of all proposals like that of Attorney-General Crow of Mis- 
souri, to make shareholders in corporations personally liable as co- 
partners, it may be said: (1) They could not affect present trust 
corporations; (2) they imply voluntary co-operation by all the states, 
which is impossible. So long as one state refused, the whole scheme 
would be futile; (3) they involve a virtual sacrifice of the benefits and 
advantages of our great corporate system, which tne country would 
not listen to. The wheels of business would stop under such a sys- 
tem. Capital could not be had for nine-tenths of legitimate under- 
takings. No man or woman not sharing the active control cwild 
afford to- invest a dollar in a» corporation, since its insolvency might 
mean the ruin of every shareholder. 

3. The suggestion made by Professor Gunton, Mr. Archbold and 
others, that the federal government charter corporations, which 
shall be thus empowered to do business in all the states, is wholly im- 
practicable politically. Congress can charter such corporations' and 
doubtless most existing trusts would cheerfully accept federal char- 
ters, since they would then have to deal with only one legislative 
body instead of forty-five as now, but no Congress can be elected 
which will adopt this policy, and few congressmen could be re- 
elected who should vote in this direction. It would virtually turn 
over to the control of the federal government nine-tenths of the do- 
mestic business of the states. 

4. Of the plan of Mr. Bryan for a system of federal licenses 
for corporations doing business in more than one state: (1) It would 
probably be rejected by his own party on the ground that it calls for 
too great an enlargement of federal power over the internal affairs 
of states, for while such a license system would not admit into any 
state a corporation obnoxious to its laws, it could easily be used to 
exclude from states corporations which the latter would like to wel- 
come, (2) It would require an amendment to the federal constitution, 



168 TRUSTS OR COMPETITION? 

which probably could not be had for the first reason stated. (3) If 
adopted and honestly enforced against the evasive tactics of trust law* 
yers and accountants, it would be serviceable as a mild palliative. (4) 
Its slight remedial value would not alone warrant the enormous effort 
required to adopt it. 

5. Of the requirement of publicity of accounts, financial condi- 
tion, etc., advocated by Mr. Bourke Cockran and most others: (1) 
It would be excellent within narrow limits if adopted and vigorously 
executed. (2) As applied to existing trusts it would be mainly service- 
able, to investors by giving them presumably authentic information of 
the financial state of each company, and to possible competitors in 
the same industry by aiding them somewhat in getting the facts re- 
quired in order to> decide whether the actual profits of business are 
sufficient to justify a competitive venture. But possible competitors 
in great industries have their own sources for such knowledge, much 
more trustworthy than the enforced and perhaps doctored reports of 
monopoly-trusts. (3) It would not remedy overcapitalization or any 
similar corporate vice in an existing trust. (4) What authority would 
require and enforce the proposed publicity? If New Jersey were 
expected to do so, there would probably be a great disappointment. 
If the federal govexaament, then a constitutional amendment, followed 
by an act of Congress, is needful. 

6. Of the proposed reduction of tariff duties on goods such as 
trusts produce, when it is demonstrable that the present duty pro- 
motes monopoly: (1) This suggestion is likely to have strong support 
regardless of party lines. The dominant Republican party is not 
likely, while in power, to permit such a movement to go far enough 
to impair the reasonably protective features of the present tariff, but 
resistance to all change (particularly in cases like that of tinplate) 
would be likely to produce some surprising results politically. (2) 
Not enough is known of the actual effects of the tariff on trust de- 
velopment to warrant any present prediction as to the remedial re- 
sults of tariff reduction. The findings of the Industrial Commission, 
now prosecuting its investigation, will go far to determine this point. 
The indications are that the cases are very few wihere the active 
promoters of trust organizations were perceptibly or consciously in- 
fluenced by any thought of the tariff. It is to be borne in mind that 
a tariff reduction which would literally "smash" a trust would also 
crush the independent manufacturers or prevent them from entering 
the field. 

7. Concerning the recommendation made by Professor Ely and 
others as to railroad discriminations and government ownership and 
management of railroads: (1) The element of discriminating rail- 
road rates is not by any means so flagrant or so economically im- 
portant as when the Standard Oil Company was crushing out com- 
petitors right and left by its aid. (2) But it is still serious, mainly 
secret, and needs to be destroyed by the strong hand. (3) Probably 
Professo'r Ely overestimates the present economic effect of this ele- 
ment as a cause and bulwark of trusts. Certainly many trusts 
would survive and prosper if all railroad discrimination were in fact 
done away, as the Standard Oil and Sugar Trust officials assert is 
already the case. (4) This result can be completely accomplished by 



SENATOR CHAUNCEY M, DEPEW. 169 

amending and then properly enforcing the interstate commerce act. 
(5) If this is done, as it should be at once, the discussion of govern- 
ment ownership of railroads may be safely postponed for a while. 

8. Of the -suggestions made by Professors Kinley and Jenks: 
(1) To prevent stock- watering would not squeeze the water out of 
the stocks of existing trusts. (2) Nobody can legally prevent future 

, stock-watering, except the state chartering future trust corporations 
— presumably New Jersey, and she will not forego her present prof- 
itable industry. The federal government cannot prevent this corpo- 
rate vice without a constitutional amendment, which, as already 
stated, probably could not be had for this purpose. The stock ex- 
changes of the great cities can, if they will, practically prevent stock- 
watering by great corporations in future by refusing to list or deal 
in the shares of any corporation hereafter organized which is ma- 
terially overcapitalized. But who shall influence and reform the 
stock exchanges? All leading exchanges now require the filing of 
a very full statement of organization, capitalization and condition by 
every corporation before listing its securities. (2) The suggestion 
that it be made unlawful hereafter to purchase and then suppress a 
patent or invention is excellent so far as it goes, but it does not go 
far toward restraining trusts. 

9. Of boycotting trust-made goods, whenever possible, and giving 
patronage and encouragement to competitors: (1) As an economic 
force this policy has never been very effective, though it is not 
absolutely impossible to render it so. The lack of organization on 
the part of the general public is the main reason for its failure. 
Then care would have to be used not to violate the laws against con- 
spiracy. (2) If applied there should be some adequate guaranty that 
the new competitor will not, after becoming formidable through pub- 
lic favor, sell out to the trust for a good price. (3) State or municipal 
factories might be justifiable as a last resort, but that is the begin- 
ning of state socialism, for which the country is not yet ready. 

10. Of Senator Chauncey M. Depew's suggestion that trusts 
will fall of their own weight: (1) Very likely this is too optimistic, 
although forces of great energy are in motion adverse to the monopoly 
element in trusts. If the present public hostility proves to be both 
deep-seated and permanent it is likely to find some mode of making 
itself felt, but not by awaiting the action of the usual forces of 
nature. (2) The tremendous economic advantage which a monopoly- 
trust possesses when once established tends to give it great staying 
power. There is no instance thus far where a trust thoroughly or- 
ganized as one corporation has finally gone to pieces. A few have 
failed through incompetent management, but each has emerged a re- 
organized monopoly-trust. 

11. Of Mr. Dili's excellent recommendation that we enact the 
English law as to personal liability on all stock not fully paid up in 
fact: What legislature shall enact the law? That of New Jersey? 
How many hopeful remedies land in that Jersey marsh! 

12. Of the leading suggestion made by Professor J. B. Clark, 
that discrimination in prices by* corporations for the purpose of 
crushing competition shall be prohibited: (1) If public sentiment 
were now ready to approve action along this line, it would probably 



170 TRUSTS OR COMPETITION? 

come nearer to being a solution than any restraining measure yet 
proposed. It would give to possible competitors just the protection 
which they need againsf the club of the monopoly-trust. It would 
promote and produce wholesome competition, and go far to prevent 
and suppress the cut-throat element in industrial rivalry. At first 
it would be difficult, but not impossible, to enforce it. (2) It may be 
that thorough public discussion of this suggestion may bring favor- 
able action sooner than Professor Clark expects. (3) It would seem 
to have the merit of applying to all trusts present and future; of 
avoiding the New Jersey barrier, and of being unobjectionable to 
the states, if they really want any effective measure adopted. With 
discrimination in freight charges, and discrimination in trust prices 
to crush new competition, substantially abolished, many students of 
the subject besides Professor Clark believe there would be not 
much left of the monopoly problem. 

II. 
REMEDY BY TRUST DISINTEGRATION. 

Those who intelligently believe that monopoly for monopoly's 
sake is the central element in the trust movement, that that 
element has no legitimate connection with the admitted economic 
tendency toward large-scale production with proportionally large 
capital, and that a permanent system of monopoly in* private 
hands ought not to be permitted, hold: (1) That remedy by 
regulation is out of the question, except as a temporary ex- 
pedient; (2) that remedy by disintegration of the trusts is right, 
practicable and obligatory; that just as the only possible cure 
for human slavery is a restoration of human freedom, so the 
only remedy for industrial bondage is a return to industrial 
liberty; that as no sops or mitigations can render personal slav- 
ery tolerable to* the self-respecting man, so no possible regula- 
tions or qualifications can reconcile a self-respecting industrial 
people to a system of private monopoly, which means their forci- 
ble exclusion from industrialism. They contend that, even on 
the ground of practicability, in any such case, extirpation of, an 
evil is far less difficult than its" erf ective regulation; that in a 
long contest over regulative measures between intrenched, alert 

Mr. Foulke has suggested that if the corporate ^ form be rendered 
by the courts untenantable for the trusts, they may become partnerships 
and thus hold on to their monopolies, issuing debentures, profit-sharing 
or otherwise, to former security holders. Aside from evident business 
reasons which' would in practice prohibit such a course, there is no 
apparent reason why the same principle of law which would make 
the shareholders and officers of a single corporation, which maintains 
a private monopoly or suppresses competition, co-conspirators against 
public policy, would not apply with like force to the members and 
agents of a partnership, and finally to an individual or sole dealer 
and his responsible employes. 



REMEDY BY TRUST DISINTEGRATION. 171 

and allied monopolies on the one hand, and an unorganized, 
poorly led and over-busy public on the other, the latter is sure 
to fight a losing battle; that the results to be accomplished by 
even the best attainable system of mere palliation aud regula- 
tion are of so slight importance and value when analyzed, added 
to the apathy and demoralization caused by the recognition of 
the right of a monopoly system to exist at all, as to undermine 
all popular interest in its enforcement; that the obstacles to 
such enforcement, under our dual and composite system of 
governments, are next to insuperable and prevent any satisfac- 
tory result; that any possible system of effective regulation must 
involve a degree of governmental interference with the business 
affairs of the people in every state that would quickly produce 
revulsion of sentiment and a repeal of regulative laws. 

They hold, on the other hand, that the policy of compulsory 
disintegration obviates nearly all of the objections that are 
thus urged against the half-way measures of regulation; that it 
is simple, just, direct, immediate; that it requires no impossible 
co-operation by forty-rive different-minded commonwealths; that 
it probably involves no change in the federal constitution, and 
that it certainly implies no objectionable curtailment of the 
authority and dignity of the states. They remind us that it does 
not mean a return to barbarism, medievalism, the hand-loom 
or the stagecoach; that it does not require even a partial sacrifice 
of the economic advantage represented by modern large-scale 
production, with corresponding and legitimate concentrations of 
capital; that it does not mean a crusade against corporations 
or wealth, or a protest against a process of natural industrial 
evolution. In a word, their contention is that the legal expul- 
sion of the monopoly element from the modern trust will deprive 
industry and society of nothing of value, but, on the contrary, 
will liberate both from an unnatural and unbearable load; that 
when by the enforcement of law it has been made plain to the 
managers of any trust that they shall no longer maintain or seek 
a monopoly, such trust will not necessarily return to its original 
scattered units, but will separate into natural economic groups, 
which will thereafter serve society and presumably earn divi- 
dends, under such a system of honorable and sensible competi- 
tion as past experience and the scientific spirit of the age shall 
evolve. What, in such case, will happen to certain watered 
stocks, is not for the public to say. The trust, even in the process 
of dissolution, needs no guardian. 

No plan has been devised and matured, and- nobody has 
gone into print with catalogues of remedies along this line, but 
events and the orderly progress of social and legal forces promise 
to be equal to the emergency. From sources which" would com- 



172 TRUSTS OR COMPETITION? 

mand attention, were names permitted to be given, are gathered 
and summarized in untechnical language, the following sugges- 
tions: 

1. The spirit of the common law, which prevails through- 
out the United States in the absence of legislation, is historically 
and immovably opposed to private monopoly. In twenty-nine 
states, including the great commonwealths of New York, Ohio, 
Indiana and Illinois, which the trusts cannot ignore and live, 
the common law is effectively reinforced by anti-trust statutes 
defining public policy and arraying it uniformly against all that 
savors of monopoly. Throughout the entire republic the power 
of the federal government is marshaled on the same side in all 
matters affecting interstate commerce. 

2. American courts, especially the highest ones, in state and 
nation, are able, incorruptible and fearless. With exceptions 
so few as to emphasize the rule, their attitude is uniformly one 
of intelligent, inflexible and aggressive opposition to monopoly. 
Whenever and wherever they have had an opportunity to pass 
upon the question, they have ruthlessly stripped off every dis- 
guise, brushed aside the cobweb defenses which legal casuists 
had provided, gone straight to the fundamental equities in- 
volved, and left no refuge within which private monopoly could 
abide. They have driven the monopoly-trust from one retreat 
to another, until now it is domiciled exclusively in the single 
corporation, its inner and final citadel, as it were, which the 
trust attorneys have advised their clients is legally unassailable. 
This advice is broadly based on these propositions: (1) In the 
line of legitimate business, freedom of contract^ freedom to 
buy and sell," cannot be legally questioned; (2) a corporation is 
one (artificial) person. As a legal unit cannot conspire or combine 
with itself, therefore, acting alone, a corporation is incapable 
of violating laws against conspiracy and combination in restraint 
of trade; (3) a modern trust is one corporation; as such it has 
bought such properties as it has chartered and legal right to 
buy, and from parties who had an equal legal right to sell. 
Not having conspired or combined with anyone, and its regular 
business being legitimate, the trust has offended against no 
law, and therefore it cannot be molested. 

3. This looks like a granite wall of indefinite height. It 
seems likely to prove a stage property of painted cardboard. 
As will be seen elsewhere in this volume, the St. Louis Court of 
Appeals, which has a wide repute for ability and conservatism, 
has recently and unanimously decided that, as a corporation is 
nothing except as represented by its shareholders, officers and 
directors, it and they may be guilty of conspiring and combining 



UNDERLYING PRINCIPLES OF LAW. 173 

with and among themselves to violate anti-trust laws or the 
common-law prohibitions against combinations in restraint of 
trade. This is not a new view, but it is newly applied to the 
modern trust. If when thus applied it proves to be good law 
with the United States Supreme Court, important results are 
likely to follow. 

The Supreme Court of Illinois, containing some of the ablest 
jurists in the country, has just decided unanimously, in the 
Glucose case, that neither an Illinois corporation, nor a foreign 
corporation doing business in Illinois, can lawfully abdicate its 
chartered functions, and sell and convey its property and busi- 
ness in that state to a trust corporation under conditions which 
show that the purpoise is to eliminate competition and create a 
practical monopoly. 

4, The principles of law underlying these two decisions, if 
applied in half a dozen leading states, or affirmed by the federal 
Supreme Court, will, it is held, disrupt practically and promptly 
nine-tenths of the trusts in existence. If so, here is the begin- 
ning of the end. As fraud vitiates every contract into which it 
enters, however regular the form may be, so monopolistic intent 
or result vitiates every scheme or business transaction, however 
regular otherwise, which manifests that intent or leads to that 
result. That freedom of contract which is impliedly guaranteed 
by the life, liberty and property clause of the federal constitu- 
tion does not extend to nor cover contracts to buy or sell property 
when such purchase or sale evidently forms part of a plan to 
monopolize an industry. No monopoly-trust can long survive 

-which cannot go into the courts and successfully defend the 
legality of the steps by which it became or sought to become a 
monopoly-trust. Such defense is believed by many to be Im- 
possible. If impossible, then most monopoly trusts have no lawful 
or enforcible title to the plants they have absorbed. 

5. Good law is good reason. To plain people it has never 
seemed reasonable that the act of systematically suppressing 
competition and of substituting private monopoly for the f-ake 
of monopoly could be unlawful and punishable when committed 
by a group of citizens using one form of organization, say the 
original trust or the practical corporate partnership, and sud- 
denly become lawful and unassailable when committed by the 
same group of citizens using a somewhat different organization, 
namely, the single corporation. In both cases the offense, the 
offender, the intent and the effects upon society are the same, yet 
the law, which attacked and destroyed the former, is expected 
to protect and foster the latter. To state the proposition clearly 
is to explode it. But this is the one proposition on which the 
modern monopoly-trust takes its stand, and upon tne soundness 



174 TRUSTS OR COMPETITION? 

of which its safety and duration depend. As the legal advisers 
of the trusts were sorely mistaken in each previous case, so, it is 
suggested, they are likely to be in this final one. Apparently 
they have not reckoned with the spirit of Anglo-Saxon law. 

6. If private monopoly embodied in trusts were in position 
to ask no favors and demand no rights from the law and from 
society, the case would be somewhat changed. But not only 
is every monopoly-trust the creature of law, not only must it 
transact business outside its own state, by permission of law, but 
day by day it depends upon the active care and assistance of the 
law of .the country and of the community for its safety, its 
solvency, its prosperity, its existence — for the protection of Its 
property and the enforcement of its property rights. The amaz- 
ing situation, then, is this, that organized private monopoly 
which is itself an outlaw by the ruling of every court before 
which it has ever appeared, by donning the apparel of a cor- 
poration claims the privilege enjoyed by every law-abiding citi- 
zen, of calling the law, the government and the people to its 
assistance, even to the entire physical and financial resources 
of the republic if necessary. Just how long this interesting 
spectacle will be presented it lies mainly with the courts to de- 
termine, and it is only recording current events to say that 
they are showing no timidity or reluctance in facing their 
responsibility. 



Professor Clark, of Columbia University, answering his own 
question, whether or not we can expel the monopoly element 
from the modern industrial trust, says, "If we must, we can." 
And this is said of Lincoln: Early in '61, when the war clouds 
had gathered, a delegation of prominent conservatives formally 
waited on the President and its solemn spokesman presented 
twelve different and to him conclusive reasons why a war of 
coercion must be a failure. As the statement proceeded, the 
President gazed out of that historic southern window, as though 
his thought was taking in all of the republic's past and all its 
future. The speaker closed impressively with, "Mr. President, 
we cannot preserve the Union by force." Without haste, and 
without hesitation, Lincoln replied, "My friends, we've got to." 
The delegation returned to their homes in sadness, and history 
went on its way. 



CHAPTER VI. 
THE COURTS AND THE TRUSTS. 



A NOTABLE JUDICIAL DECISION. 

A trust which has taken the form of a single corporation (as practically 
all trusts have now done) cannot escape the prohibition and pen- 
alties of anti-trust laws on the plea that, being a single entity, 
it cannot combine or conspire with itself and hence cannot violate 
a law against combinations in restraint of trade. Such a corporation 
is necessarily composed of and controlled by natural persons and 
these may be guilty of combining and conspiring with each other 
and with the corporation to violate law. 



The St. Louis (Mo.) Court of Appeals has recently (August, 
1899) rendered a decision, following in the line of others by 
both state and federal courts, herein cited, which seems to go 
to the heart of the trust question on its legal side. The case 
involved the construction and application of the Missouri anti- 
trust statute, and, as will be seen, the decision, which was 
unanimous, broadly covers the legal proposition stated at the 
head of this article. 

One section of the act of 1891, of that state, provides that 
"any purchaser of any article or commodity from any individual, 
company or corporation transacting business contrary to any 
provision of the preceding sections of this act, shall not be liable 
for the price or payment of such article or commodity, and may 
plead this act as a defense to any suit for such price or payment." 
The court held in substance, says the Central Law Review, that a 
trust cannot cloak its object under the form of a corporation and 
evade the penalties provided by the anti-trust law. Under this de- 
cision accounts with trusts operating as corporations in Missouri 
are not collectible. The suit was by the National Lead Company 
against the S. E. Grote Paint Store Company for balance due 
on account. The defense was that the plaintiff was a trust 

i75 



176 TRUSTS OR COMPETITION? 

formed to control prices, in violation of the provisions of the anti- 
trust law. On a trial below the plaintiff got judgment. The Court 
of Appeals reverses and remands the «ase. The evidence showed 
that the National Lead Trust was organized in 1887 to control the 
lead business of the country. It continued under the trust form of 
organization until 1891, at which time it had absorbed thirty 
companies in the United States and Mexico engaged in the paint 
and lead business. 

COMBINATION CHANGED TO A CORPORATION. 

In 1891, following the enactment in Missouri of legislation 
adverse to trusts it was organized in the form of a corporation 
under the name of the National Lead Company. 

The attorneys for the National Lead Company contended, 
in the trial of the case, that the defense set up by the attorneys v 
of the S. E. Grote Paint Store Company could not stand because 
the National Lead Company was a corporation, not a trust. 
They argued to the Court of Appeals that the trial court had 
erred in admitting evidence of the objects of the corporation— 
in other words, evidence tending to show that it was a corpora- 
tion organized to control prices as a trust. 

It was also claimed that the company, having a charter 
from the state, could only be proceeded against in the name 
of the state and not by an individual. 

The opinion of the Court of Appeals, written by Judge Bond 
and concurred in by all the members of the court, is lengthy and 
exhaustive. 

"The crucial question in this case," says Judge Bond, "is 
whether the plaintiff corporation, either in its organization or 
business operations in this state, has offended any of the pro- 
visions of its law ? That the predecessor of the plaintiff, the 
'National Lead Trust,' was an unlawful combination, both in 
purpose and fact, is sufficiently established by the nature of the 
agreement under which it was created and the methods and 
practices resorted to in furtherance of that agreement. The 
agreement in question can only be construed as a contract to 
suppress competition, fix the price of commodities, and limit 
their production, and to restrain trade. Unless some one or all 
of these purposes had been entertained by the signers of the trust 
agreement, it would not have contained provisions looking to the 
acquisition by the trustees of the entire lead business of the 
country nor would it have united in the accomplishment of that 
end a majority of the stockholders of the largest corporations 
dealing in that product. That it had these objects in view and 
practically accomplished them, is evident from the fact that it 



TEE COURTS AND THE TRUSTS. 177 

started with a contract of eight corporations and terminated 
after having issued ninety millions of trust certificates, and after 
it formed a combination of thirty corporations, constituting a 
large majority of the lead dealers of the country who had united 
themselves together in the effort to realize dividends upon the 
aforesaid capitalization out of assets of less than one-fourth 
in value of the amount for which trust certificates had been 
issued. While the conclusion of the illegal purpose of the trust 
agreement is irresistible upon a consideration of its several pro- 
visions and the manner in which they were carried out, it will 
appear from an examination of the cases that this result had 
been declared by every court called upon to review that agree- 
ment, or others substantially like it. State vs. Standard Oil 
Company, 49 Ohio St. 137; Distillers, etc. Company vs. The Peo- 
ple, 156 111. 448; Bishop vs. A. Preserving Co., 157 111. 1. c. 311; 
People vs. N. R. S. R. Company, 121 N. Y. 582; Unckles vs. Col- 
gate, 148 N. Y. 529; U. S. vs. Freight Assoc, 166 U. S. 505. 

UNLAWFUL CHARACTER NOT TRANSMITTED. 

"But the illegality of the organization and operation of the 
National Lead Trust does not involve the conclusion that the 
purchaser of its assets, whether a natural or artificial person, 
succeeded also to the status of that illegal combination under 
the laws enacted in this state for the punishment of pools, trusts 
and conspiracies. For the mere purchase by one of the assets 
which another has employed for an illegal purpose does not of 
itself imply that they will bemused by the purchaser for the 
purpose of effectuating the objects to which they had been de- 
voted by the seller. Such an intent on the part of the purchaser, 
if inferable, must be gathered from proof of all the circum- 
stances characterizing the transaction, as well as his subse- 
quent conduct. As to these sources of proof, the record in the 
case under review shows that the beneficial owners of the prop- 
erty were the subscribers to the National Lead Trust and holders 
of its certificates, and that these same persons remained the 
beneficial owners of the same property after it was converted 
into the capital of the plaintiff corporation, the only difference 
being that each holder of a trust certificate received in lieu 
thereof shares of stock in the new corporation at an agreed rate 
of exchange, and the further faet that the legal title to the prop- 
erty was put into a corporate entity instead of a body of nine 
trustees appointed under the trust agreement. The sale itself 
was titular, rather than real/' 

Upon the question whether the mere fact of the plaintiff's 
corporate charter exempts it from the application of the law pro- 

12 



178 TRUSTS OR COMPETITION? 

hibiting combinations and trusts, the court says: "The first sec- 
tion of the act of 1891, supra, provides that any corporation 
wherever created which is 'organized to do business in this state, 
or any * * * individual or other association of persons what- 
soever who shall create, enter into, become a member of or a 
party to any pool, trust agreement, combination, confederation or 
understanding with any other corporation, * * * individual, 
or any person or association of persons, to regulate or fix the 
price of any article of merchandise or commodity, "or in the same 
manner" to fix or limit the amount or quantity of any article, 
commodity or merchandise to be manufactured, mined, produced 
or sold in this state, "shall be deemed and adjudged guilty of a 
conspiracy to defraud, and be subjected to penalties as provided 
in this act." Can it be rationally held that the legislature had in 
view the commission of the criminal offense created in the fore- 
going section by a corporation as such, separate and apart from 
the individuals composing it? There is no legal ground upon 
which such a view can be entertained." 

THE MEN BEHIND A CORPORATION CAN CONSPIRE WITH IT. 

A corporation can only act through its members or their 
agents. The corporate entity with wmich the law clothes it for 
special purposes is not self-acting, hence there w T as no thought 
of its action only, in the mind of the framers of the statute. 
The evident purpose of the legislature was to specify certain 
acts, which, if done by its stockholders or governing bodies, 
should constitute a crime on the part of the corporation. It did 
not contemplate the commission of an offense by an impalpable 
abstraction, which could neither think nor act; but it intended to 
bind this corporate entity by the imputed actions of its human 
agencies. In other words, the legislature referred to the cor- 
poration in its true essence as an association of persons without 
which it could not exist, and through whom alone it must per- 
form all its functions as a corporate being. Morawetz on Cor- 
porations, Section 227; Taylor on Corporations, Section 51; State 
vs. Standard Oil Company, 49 Ohio St. 137; Buffalo Oil Com- 
pany vs. Standard Oil Company. 106 N. Y. 669; Boogher vs. Life 
Association of America, 75 Mo. 319. Hence it must follow that 
if the stockholders and governing officers of the plaintiff corpora- 
tion combined with each other to violate any of the provisions 
of the section under review through the instrumentality of their 
corporate entity, then the corporation composed by them was a 
party to such illegal combination within both the letter and the 
spirit of the above section of the Act of 1891. Or correctly stated, 
that a combination which is illegal under the anti-trust law ca^n- 



THE ADDYSTON PIPE COMPANY CASE. 179 

not be operated under the cloak of a corporation, and by its 
constituent members or governing bodies. This conclusion is 
believed to be irresistible in reason and has received the un- 
wavering support of the courts and the text- writers. Ford vs. 
Milk Shippers' Association, 155 111. 166; People vs. Gas company, 
130 111. 275; Distilling company vs. People, 156 111. 448; Strait 
vs. National Harrow Company, 18 N. Y. Supp. 224; Beach on 
Monopolies, Section 158; Hirsch on Com. Corp., p. 86; American 
Biscuit and Manufacturing Company vs. Klotz, 44 Fed. Rep. 723; 
Merz Capsule Company vs. United States Capsule Company, 67 
Fed. Rep. 414. In the case of Ford vs. Milk Shippers' Associa- 
tion, supra, the members of a milk trust, subsequently incorpor- 
ated, brought an action against a purchaser of the commodity 
sold by the corporation, who defended on the ground that it was 
formed in furtherance of a trust scheme, and transacting busi- 
ness in contravention of an anti-trust act substantially the same 
as that pleaded in defendant's answer in the present action. It 
was insisted for the plaintiff that being a corporation it could 
not violate the statute, to which defense the Supreme Court 
of Illinois answered as follows: "The corporation, as an entity, 
may not be able to create a trust or combination with itself, but 
its individual shareholders may, in controlling it, together with 
it, create such trust or combination that will constitute it, with 
them, alike guilty." The point in judgment in that case is iden- 
tical with the issue presented in the one before us. The con- 
clusion reached by the Illinois court is logical, fully sustained 
by the above and other authorities, and in exact accord with 
the views heretofore expressed in this opinion. 



THE LATEST ANTI-TRUST DECISION. 



THE ADDYSTON PIPE QOMPANY CASE. 

On December 4, 1899, the Supreme Court of the United States 
unanimously affirmed the decision of the Circuit Court of Appeals of 
the sixth district against the Addyston Pipe Company, known as the 
Iron Pipe Trust, Justice ^Peckham writing the opinion. The action 
was brought in Tennessee by the United States attorney under the 
Federal Anti-trust Law, alleging restraint of interstate commerce. 
The District Court decided in favor of defendants, but this decision 
was reversed by the Circuit Court of Appeals, Justice Harlan and 
Judge Taft sitting. The Pipe Company appealed to the Supreme 
Court. The defendants in the case were six corporations, whose 
plants were situated in several different states, and doing a general 



180 TRUSTS OR COMPETITION? 

business in the manufacture and sale of cast-iron, water and gas pipe. 
They entered into a close combination, but not a consolidation, 
whereby they agreed to maintain a uniform schedule of prices, to 
parcel out the country among themselves, to refrain from selling 
in each other's territory, and to auction off among themselves the 
privilege of being practically the sole bidder for contracts in unal- 
lotted territory. In other words, all competition was suppressed, 
and each member of the combine had a close monopoly within its own 
district. 

The Supreme Court decides, among other things, that the agree- 
ment not to ship goods into certain states is a direct restraint of inter- 
state commerce, and, hence, in violation of the federal anti-trust law 
of 1890. The contention of the defendants' counsel was that under 
the federal constitution private contracts between individuals and 
corporations cannot be questioned or interfered with by legislatures 
or the courts on the ground that they operate in restraint of inter- 
state commerce. The Supreme Court squarely negatives this argu- 
ment, and holds that the power of Congress over interstate commerce 
and the maintenance of competitive conditions are more important 
and necessary tlxan the freedom of the citizen to enter into contracts 
of this nature. The decision draws a clear distinction between com- 
binations affecting interstate commerce, and those whose operation 
is confined within the boundaries of a single state. 

COMMENT. 

This decision is important in several respects: (1) It clearly 
indicates the attitude and temper of the Supreme Court toward 
private monopoly not affirmatively authorized by law; (2) it shows 
that our highest court is thus far unanimous in that attitude; (3) it 
settles the fact that the power of Congress to regulate interstate com- 
merce applies to the acts of individuals and corporations and not 
merely to the states and subdivisions thereof. The decision has only 
an indirect bearing upon the legality of that latest form of the indus- 
trial trust which consists of a single corporation absorbing an en- 
tire industry by the outright purchase of all competing plants. All 
other possible forms of monopoly seem now to have been branded as 
unlawful and the public, including both the friends and opponents of 
the trust system, will await with much interest the trial of a case 
which shall test the final question, that question being substantially 
this: The highest courts of the country, federal and state, having 
at every stage unanimously declared it to be unlawful to monopolize 
an industry by any and every other conceivable method, because such 
monopolizing is contrary to public policy and subversive of the public 
welfare, will the same courts at the next and final stage declare 
it lawful to monopolize the same industry simply because the same 
competing concerns, with the same intent and the same results, com- 



TRUSTS AND THE FEDERAL LAWS. 181 

bine through the process of purchase and sale instead of by agree- 
ment, co-operation or conspiracy? Obviously that freedom of contract 
which the federal constitution impliedly guarantees to the citizen is 
subject to construction, interpretation and limitation by the courts in 
the exercise of their wide judicial discretion. Are the courts which 
have rendered the recent unbroken line of anti-trust decisions 
likely or unlikely to give that implied guaranty an interpretation 
which, in their already expressed opinion, would establish a monopoly 
system that is contrary to public policy and subversive of the public 
welfare? "On the answer to this question would seem to depend 
the continued existence of the present trust system. 



TRUSTS AND FEDERAL LAW. 

The attitude of the United States government toward trusts is 
expressed by the Act of July 2, 1890, an Act "to protect trade and 
commerce against unlawful restraints and monopolies," which pro- 
vides "that every contract or combination in the form of trust or 
otherwise or conspiracy in restraint of trade or commerce among 
the several states or foreign nations is hereby declared to be illegal." 

This statute was based upon the constitutional provision that 
Congress shoujd have authority to regulate commerce with foreign 
nations and among the several states. Several important decisions 
of the Supreme Court defining the applications of this statute were 
rendered in the year 1898. In the meanwhile, however, rules affecting 
its construction have already been laid down. For instance, in 1894, 
it was decided by the Supreme Court that the statute did not refer 
to transactions within the boundaries of single states. The case in 
which this was decided was that of the United States vs. E. C. Knight 
Company, and arose from the monopoly of the refined sugar manu- 
facture. It was urged that the possession of this monopoly was a 
violation of the Act, since the sugar would be sold outside the states 
m which it was produced. The court decided, however, that the 
destination of the sugar was a matter of no importance and that 
legally viewed the action of the corporation was wholly within the 
jurisdiction of the state in which it was located. Any different 
interpretation of the Act would give Congress, in the opinion of the 
court, control over practically all important business transactions 
which could be shown to affect indirectly interstate commerce. Any 
contracts or combinations to control domestic enterprise with- 
in the state may tend indirectly to restrain interstate com- 
merce, but the national government did not by this Act 
intend to assume control over them to the exclusion of the 
. jurisdiction of the state. The only things which this Act sought 
to prohibit were contracts, combinations or conspiracies which had to 
do with the final movement of the completed product from the state 
of its origin to the state of its destination. The Act did not apply 



182 TRUSTS OR COMPETITION? 

to the production, which was altogether distinct from interstate 
commerce. 

The next important decision affecting the construction of the 
Act was that in the case of the Trans-Missouri Freight Association 
in 1897. A large number of railroad companies had made an agree- 
ment to establish and maintain reasonable rates, rules and regula- 
tions on all freight N traffic of the -associate roads. The emphasis was 
laid on the word "reasonable," and it was urged on behalf of the 
companies that the kind of contracts, combinations and conspiracies 
referred to in the law were only those which resulted in an un- 
reasonable restraint of trade or commerce. As to this, the court 
refused to consider the character of the restraining contract and 
held that the Act applied to all contracts, whether reasonable or un- 
reasonable, that tended to the restraint of interstate or foreign trade. 
This was decided by a bare majority of the court. 

In another case, that of the Joint Traffic Association, there was 
an agreement among several railroad companies "to establish and 
maintain reasonable and just rates, fares, rules and regulations on 
state and interstate traffic." The same principles were involved as 
in the case of the Trans-Missouri Association and the court rendered 
an adverse decision on October 24, 1898. Some new arguments of 
importance were advanced at the trial. It was held that the Act 
as construed by the court in the case of the Trans-Missouri Associa- 
tion was unconstitutional on these grounds. The constitution gave 
Congress the power to regulate commerce, but this power was sub- 
ject to another clause providing that no person should be deprived 
of liberty without due process of law. The rights which all per- 
sons possess of freedom in the making of contracts and in the choice 
and pursuit of callings could be limited by legislation only in so far as 
was compatible with the general welfare and security of society. A 
contract of any kind may be in effect a restraint of trade, but Con- 
gress has not the authority to prohibit such a contract merely on that 
ground. The reasonable or unreasonable nature of such restraint 
of trade, in other words its bearing upon the general welfare of 
society, must be determined before it is prohibited by law. The 
Trans^Missouri decision, however, had refused to take into accouat 
the reasonable or unreasonable character of such transactions. It 
seemed to assert the principle that Congress by an arbitrary act 
could prohibit contracts which were in no wise detrimental to the 
general welfare. Now that this principle was admitted there was 
nothing to prevent the prohibition of a great variety of business con- 
tracts of perfectly justifiable nature. As illustrations of the sort of 
contracts which might be prohibited as in restraint of trade were 
mentioned organizations of mechanics to limit the number of persons 
employed in the industry and to maintain wages; a contract of part- 
nership as the incorporation of a company consisting of persons pre- 
viously engaged in the same line of business; the sale of the good 
will of a business with an agreement not to enter the field as a com- 
petitor, etc. The court admitted that the constitutional rules as 
thus interpreted were correct. Such contracts as were cited, however, 
did not come within the legal definition of contracts, combinations or 
conspiracies in restraint of trade. The court said that "the Act of 



CONSTRUCTION OF THE FEDERAL ANTI-TRUST LAW. 183 

Congress must have a reasonable construction or* else there would 
scarcely be an agreement or contract among business men that 
could not be said to have indirectly or remotely some bearing upon 
interstate commerce as a possible effect to restrain it." The prin- 
ciple of the decision rendered in the Trans-Missouri case was that 
only such contracts or combinations as were directly in restraint of 
trade fell within the provision of the law. The law did not apply 
to those contracts whose effects were indirectly in restraint of 
trade. This decision w T as again rendered by a bare majority. 

Another important case decided at the same time was that of the 
Kansas City Live Stock Exchange, which was said to be an illegal 
combination in restraint of commerce, because by the rules of the 
Exchange the members were in some degree restricted in their 
dealings with outsiders, and because these rules in other ways limited 
trade to some extent. Here the court decided that the Anti-Trust 
Act did not apply to any other trade or commerce than that which 
exists or may exist among the several states or with foreign na- 
tions; it was not /to be construed as applying to all operations which 
might in the long run add to the cost of such foreign or interstate 
commercial interchange. Although the members of the Kansas City 
Live Stock Exchange dealt in Jive stock, which was purchased from 
or sold in other states and territories, it did not fall within the terms 
of the statute as being in restraint of trade. In this decision the court 
was unanimous. 

It is obvious that some limitation of the bearing of the Act in 
practice was necessary, since otherwise it would have had a range 
far beyond that which was intended. It wa>s a difficult thing to im- 
pose these limitations without real or apparent inconsistency. Such 
inconsistency becomes conspicuous in a comparison of the Joint Traf- 
fic case or the Live Stock Exchange case with' the Trans-Missouri 
case. In the latter case the demand that; the Act should be con- 
strued reasonably and not literally was rejected and the court de- 
clared that any contract in restraint of interstate or foreign trade, 
whether reasonable or not, was prohibited. In each of the two former 
cases, however, the court said that a reasonable construction must 
be given to the Act and that certain contracts did not come within 
the legal definition of acts in restraint of trade, and that the Act did 
not apply to contracts which only indirectly tended to restrain inter- 
state trade. 

To sum up, the construction placed by the court upon this Act 
down to the close of the year 1898 has established the following prin- 
ciples: (1) The statute does not relate to any transaction that takes 
place only within the boundaries of a single state. (2) It does not 
relate to transactions which have only an indirect effect in restraint 
of interstate commerce. (3) In determining whether contracts or 
combinations exert a direct restraint upon interstate commerce, the 
4 Act is to be reasonably interpreted. (4) That any transactions 
which do so directly tend to restrain trade fall, whether reasonable 
or not, under the prohibitions of the Act. Thus prices may be kept 
up by a combination or producers in any one state, even though the 
commodity is destined for exportation to another state; wage-earners 
may form combinations to limit the number employed in any par- 



184 TRUSTS OR COMPETITION? 

ticular industry or to maintain wages; persons may combine to main- 
tain the prices of goods or services or facilities which are employed 
in interstate commerce; and, in general, any line of action, whether in 
the long run restrictive of interstate commerce or not, is not within 
the application of the Act unless its effect is directly in restraint of 
that commerce. Thus after eight years of application the Inter- 
State Commerce Act has been found in practice to have a very 
limited scope. So far as there is a further demand for legislation in 
restraint of combinations and monopolies, it can be met only by the 
legislative branches of the different state governments, if the Act 
of July 2, 1890, continues to be interpreted as at present—Inter- 
national Year-Book, 1898, pp. 783-5. 



TRUSTS AND THE PUBLIC WELFARE. 

Attitude of American Judiciary as Most Recently Illustrated by the 
United States Supreme Court. 

Mr. Justice Beckham, in presenting the majority opinion of 
the United States Supreme Court in the well-known case of the 
United States vs. The Trans-Missouri Freight Association, March 
22, 1897, expressed these views on the general subject of trusts 
and trade combinations preventing free competition: 

"It is true the results of trusts or coimbinations of that nature 
may be different in different kinds of corporations, and yet they 
all have an essential similarity and have been induced by motives 
of individual or corporate aggrandizement as against the public 
interest. In business or trading combinations they may even 
temporarily, or, perhaps, permanently, reduce the price of the 
article traded in or manufactured, by reducing the expense in- 
separable from the running of many different companies for the 
same purpose. Trade or commerce under those circumstances 
may, nevertheless, be badly and unfortunately restrained by driv- 
ing out of business the small dealers and worthy men whose lives 
have been spent therein and who might be unable to readjust 
themselves to their altered surroundings. Mere reduction in the 
price of the commodity dealt in might be dearly paid for by the 
ruin of such a class and the absorption of control over one com- 
modity by an all powerful combination of capital. In any great 
and extended change in the manner or method of doing business it 
seems to be an inevitable necessity that distress and perhaps ruin, 
shall be its accompaniment, in regard to some of those who were 
engaged in the old methods. A change from stage coaches and 
canal boats to railroads threw aij once a large number of men 
out of employment. Changes from hand labor to that of machin- 



TEMPER OF THE U. 8. SUPREME COURT. 185 

ery, and from operating machinery by hand 10 the application of 
steam for such purpose, leave behind them, for the time, a 
number of men who must seek other avenues ot livelihood. 
These are misfortunes which seem to be the necessary accom- 
paniment of all great industrial changes. It takes time to effect 
a readjustment of industrial life so that those who are thrown 
out of their old employment by reason of such changes as we 
have spoken of may find opportunities for labor in other depart- 
ments than those to which they have been accustomed. It is a 
misfortune, but yet in such cases it seems to be the inevitable ac- 
companiment of c'hange and improvement. It is wholly different, 
however, w T hen such changes are effected by combinations of 
capital, whose purpose in combining is to control the production 
or manufacture of any particular article in the market, and ty 
such control dictate the price at which the article shall be sold— 
the effect being to drive out of business all the small dealers in the 
commodity, and to render the public subject to the decision of the 
combination as to What price shall be paid for the article. In 
this light it is not material that the price of an article may be 
lowered. It is in the power of the combination to raise it, and 
the result, in any event, is unfortunate for the country, by de- 
priving it of the services of a large number of small, but inde- 
pendent dealers, who were familiar with the business, and wno 
had spent their lives in it, and who had supported themselves and 
their families from the small profits realized therein. Whether 
they be able to find other avenues to earn their livelihood is not 
so material, because it is not for the real prosperity of any counv 
try that such changes should occur which result in transferring 
an independent business man, the head of his establishment, small 
though it might be, into a servant or agent of a corporation for 
selling the commodities which he once manufactured or dealt in- 
having no voice in shaping the business policy of the company and 
bound to obey orders issued by others. Nor is it for the substan- 
tial interests of the country that any one commodity should be 
within the sole power and subject to the sole will of one powerful 
combination of capital. Congress has, so far as its jurisdiction 
extends, prohibited all contracts or combinations in the form of 
trusts entered into for the purpose ot\ restraining trade and 
commerce. The results naturally flowing from a trade or com- 
bination in restraint of trade or commerce when entered into by 
a manufacturing or trading company, such as above stated, 
while differing somewhat from those which may follow a contract 
to keep up transportation rates by railroads are, nevertheless, of 
the same nature and kind, and the contracts themselves do not 
so far differ in their nature that they may not all be treated alike 



186 TRUSTS OR COMPETITION? 

and be condemned in common. It is entirely appropriate, gener- 
ally, to subject corporations or persons engaged in trading or 
manufacturing to different rules from those applicable to rail- 
roads in their transportation business, but when the evil to be 
remedied is similar in both kinds of corporations, such as con- 
tracts which are unquestionably in restraint of trade, we see no 
reason why similar rules should not be promulgated in regard to 
both, and both be covered in the same statute by general language 
sufficiently broad to include them both. We see nothing either in 
contemporaneous history, in the legal situation of the time of the 
passage of the statute, in its legislative history, or in any general 
difference in the nature and kind of these trading or manufactur- 
ing companies from railroad companies, which would lead us to 
the conclusion that it cannot be supposed the legislature, in pro- 
hibiting the making of contracts in restraint of trade, intended to 
include railroads' within the purview of that act." 



THE ILLINOIS GLUCOSE CASE. 

The first important case to be determined by the highest court 
of any state, bearing directly upon the legality of that latest form 
of industrial trust, the single corporation, was decided on 
October 19, 1899, by the Supreme Court of Illinois in a unani- 
mous, elaborate and forcible opinion. The case was that of 
George P. Harding and others against the American Glucose 
Company. The facts as brought out at the trial and summarized 
in the opinion written by Justice Magruder are briefly these: 

The business of producing glucose can only be carried on 
successfully in what is known as the "corn belt" of the United 
States. The industry is represented at present by six large 
factories, mainly situated in Illinois and Iowa, all of which were, 
until 1897, independent and competing concerns. One of these 
was the establishment at Peoria, Illinois, owned by the Ameri- 
can Glucose Company, a corporation of the State of New Jersey. 
In August, 1897, the Glucose Sugar Refining Company of New 
Jersey was organized with a stock capital of $40,000,000 for the 
purpose of consolidating these six factories, that is, the entire 
glucose industry, into a single ownership or trust. The consent 
was obtained of the holders of a majority of the stock of each of 
the local companies, including the American of Peoria. Under the 
laws of New Jersey, all the property and business of a corporation 
may be legally sold and conveyed by the directors with the eon- 
sent of two-thirds in interest of the stockholders, while in most 



THE ILLINOIS GLUCOSE CASE. 187 

of the States, including Illinois, this is not the case, and -any 
minority stockholder has a right to make legal protest against 
such action, except when the corporation for legitimate reasons 
is going into liquidation and retiring from business. Conveyance 
of the plant and business of the American Glucose Company was 
executed and delivered to the newly formed trust in 1897, where- 
upon Harding and other dissenting stockholders of the American 
Company brought the suit just decided to invalidate and prohibit, 
such sale and conveyance on the ground that they were illegal 
(1) because the consent of the minority stockholders was neces- 
sary and was not obtained, and (2) because such attempted sale 
and conveyance constituted part of a combination and conspiracy 
to form a trust and monopoly contrary to public policy and in 
violation of the anti-trust statute of Illinois. It was alleged by 
the plaintiffs that such trust had been organized under the laws 
oi New Jersey for the purpose of regulating and fixing the orice 
of glucose and grape sugar, controlling the output, closing several 
of the factories, eliminating competition and thus creating an 
unlawful monopoly in the glucose industry. It was further al- 
leged and proven that the outgoing companies had bound them- 
selves not to engage in the manufacture of glucose within a radius 
of 1,500 miles of Chicago, and as this covered the entire corn 
belt, it was in fact a, contract in entire restraint of trade. The 
alleged facts as to the formation of the trust were admitted 
by the defendants to be true, but they relie.d mainly on the con- 
tention that as Harding and his co-plaintiffs were stockholders in 
a New Jersey corporation they were bound by New Jersey lavv s 
and therefore had no standing in an Illinois court. The lower 
court had ruled against the plaintiffs on this point. The Supreme 
Court rules for the plaintiffs on practically every point; reverses 
the decree of the court below, with directions to enter a decree 
setting aside all deeds, assignments, contracts and other instru- 
ments constituting or accompanying the attempted conveyance 
and delivery of the Peoria plant and business of the American 
Glucose Company to the trust known as the Glucose Sugar Re- 
fining Company, and "to grant such other and further relief 
as is consistent with the prayer of the bill and as is sustained by 
the evidence already on record." 

The defense claimed that because the American Glucose Com- 
pany was organized in New Jersey a bill in the Illinois court 
wouid not lie. Regarding this proposition the court says when- 
ever a foreign corporation comes into Illinois to do business 
it is subject to all the liabilities, restrictions and duties that are 
or may be imposed on corporations of like character organized 
unaer the general laws of the state, and shall have no other or 
greater power. It says it is a settled doctrine of this state, estab- 



188 TRUSTS OR COMPETITION? 

lished by many decisions of the court, that foreign! corporations 
do not come into this state as a matter of legal right, but only 
by comity. "Foreign corporations," it says, "cannot be permitted 
to come into this state for the purpose of asserting rights in 
contravention of our law.'' 

The preponderance of opinion among leading and disinterested 
lawyers, who have publicly expressed their views, is that this 
decision constitutes a distinct and very important step in the 
solution of the trust question. They consider its significance 
to be two-fold in that, (1) it brands with illegality as against 
public policy, and in this case also as violative of the Illinois 
anti-trust statute "the present form of trust whereby a single 
large corporation, formed for the purpose, buys up all or nearly 
all the plants of an industry for the purpose, or with the result, 
of suppressing competition and thereby creating a virtual mo- 
nopoly. Hitherto this final form of trust has been considered by 
those interested in the trust system as legally unassailable. ^2) 
The decision indicates with apparent certainty the attitude of the 
judicial mind generally toward these modern monopoly organi- 
zations. In this double view, it is held, the importance of the 
decision can scarcely be overestimated. The pronouncements of 
the court are so fundamental, sweeping and emphatic as to leave 
no< doubt as to what its course would be in any other or future 
case involving the question of the inherent and necessary illegality 
of any trust organized upon the lines of the Glucose Sugar Re- 
fining Company, In the course of the opinion the Court uses 
this language: 

"A question of law which arises in the case is whether the 
facts set up in the bill constitute an illegal trust. The public 
policy of the State of Illinois has always been against trusts 
and combinations organized for the purpose of suppressing com- 
petition and creating monopoly. It makes no difference that the 
agreement for the illegal combination is not a formal written 
agreement. It may be a verbal agreement or understanding or 
a scheme not embodied in writing, but evidenced by the action 
of tfie parties. If the transactions referred to in the bill in 
this case did not amount to an absolute agreement made in ad- 
vance between the six corporations they at least constituted a 
scheme understood by all the corporations and participated in 
by them all. The carrying out of the scheme would necessarily 
result in suppressing competition in the manufacture of glucose 
and in the creation of a monopoly in that business." 

The leading journals of Chicago attach the greatest Im- 
portance to the decision. The "Tim6s-Herald" editorially says: 

"The unanimous decision of the Illinois Supreme Court in the 
Glucose Trust case is of the highest significance. It answers, so far 



- IMPRESSION MADE BY THE GLUCOSE DECISION. 189 

as this state is concerned, a question of the greatest moment and 
practical importance. It deals with the latest, newest form of com- 
bination — a form which many have supposed to be beyond danger 
of successful legal attack. The kind of combination which the Su- 
preme Court of Illinois now pronounces as unlawful and injurious 
to the public welfare as were the kinds previously attempted was 
held legitimate and proper in a. New Jersey decision rendered a few 
months ago. It is safe to say, however, that the tribunals of other 
states will follow the law of Illinois as now laid down and inter- 
preted rather than the law of New Jersey. * * * The striking 
feature of the case is the emphatic declaration that the 'new' form 
of combination, based on the alleged right to buy and sell corporate 
assets, is unlawful in Illinois." 

The serious view taken of the decision in financial centers 
is indicated by the following extracts from an editorial in "The 
Outlook" for November 4: 

"The decision of the Supreme Court of Illinois in the Glucose 
case shows tUat combinations of competing factories may often be 
prevented as easily as combinations of competing banks.* * * As 
Illinois forms a large part of the "corn belt," in which alone glucose 
can be successfully manufactured, and as the decision declares null 
and void the transfer by sale of any Illinois .factory to the National 
combination, the blow administered to the trust is of far-reaching im- 
portance. * * * The decision of the Illinois court seems to pre* 
elude the establishment of a monopoly for some time to come. 
The magnitude of the victory for anti-trust legislation is so great 
that friends as well as foes hesitate in estimating its effects until 
they learn whether it is to be followed by other decisions requiring 
the release of the property of similar trusts to the corporations and 
firms originally controlling them." 

President C. H. Matthiessen of the Glucose Trust (the Glucose 
Sugar Refining Company) says in an interview 7 : 

"There has been such confusion in the public mind about the 
decision and its effect on this company that a word or two is not 
out of place. If the final court of review stands by the opinion just 
delivered, this company will cheerfully conform its course along the 
lines which the highest court shall direct. Courts do not destroy 
property and where the court holds that certain methods are con- 
trary to statute, it has been, and I believe will always be, that the 
parties in interest are permitted to conform to the court's require- 
ments without sacrificing or destroying corporate property or stock- 
holders' interests. If finally the decision in the Harding case stands, 
the proper steps to protect the interests of the company and its 
stockholders can and will be promptly and decisively taken." 



190 TRUSTS OR COMPETITION? 

CONCERT WITHOUT COMPACT UPHELD. 

The following memorandum of a very recent and leading case 
(Post et al. vs. Southern Railway Company, Supreme Court of 
Tennessee, April Term, 1899; opinion filed May 27, 1899) has especial 
significance for the conservative attitude taken by the highest court of 
a state, whose legislature has enacted one of the most severe of anti- 
trust laws, for the respectful frankness of its comment on the opinions 
of the United States Supreme Court in the notable Trans-Missouri and 
Traffic Association railroad cases herein cited, and for the well- 
reasoned approval it gives to the suggestions of the latter tribunal to 
the effect that excessive competition may be lawfully and honorably 
avoided and trusts dispensed with by concert of action without com- 
pact among competitors. 

The main point at issue in this case was the claimed right of a 
shipper of through freight at through rates to designate the particular 
route of such shipment beyond the line of the initial or receiving car- 
rier. While deciding adversely to such claim, the court had occasion 
to pass upon the following collateral question: 

A Conference of Competitors.— It was claimed by the complaining 
shippers that at a meeting of railway and packet company representa- 
tives, participated in by the Southern Railway Company and held in 
New Orleans prior to the bringing of this suit, an agreement to fix 
and maintain transportation rates was entered into of a nature Vio- 
lative of the act of Congress of July 2, 1890, Commonly known as the 
Sherman Anti-trust Law, and injurious to the complainants as ship- 
pers. The court said: "It appears that prominent representatives of 
all the leading lines of railroad entering Memphis, and of one packet 
line, attended this meeting at New Orleans, which was formally 
held with a chairman and secretary. It is said on one hand that a 
binding contract was entered into between the several parties to do 
several things and pursue certain policies; while, on the other hand, 
it is said there was no binding contract that could be legally enforced 
entered into, but that the several individuals for their companies 
outlined the course his company would pursue." 

The opinion then ^quotes the minutes of the proceedings of the 
meeting, from which it appears that, presumably after a general oral 
interchange of views, each representative of a separate transportation 
line successively announced the course which his company would 
pursue concerning the shipment of export cotton out of Memphis, the 
common competing point for all the lines. Among other details each 
announced that his company would not "cut unlawfully or. secretly 
reduce, in any way whatever, its published tariff rates on cotton from 
Memphis destined to points within the United States and Canada;" 
also that each would "control the route of its cotton from Memphis to 
foreign ports." When all had been heard it proved that each had 
made the" same announcement as all the others. A supplementary 
announcement was made by each representative in like manner to the 
effect that his company "would limit its carrying of the cotton from 
and passing through Memphis from September 1, 1898. to August 
31, 1899, to— per cent." 

The several percentages or proportions thus separately announced 



CONCERT WITHOUT COMPACT. 191 

aggregated 100 per cent, or the whole of such traffic. No penalty or 
forfeiture of any nature was mentioned or implied, but each an- 
nouncement contained the item that the company making it "will 
give ten days' notice in advance of any change in its policy." Sub- 
sequently the vice-president of the Missouri Pacific Railway, which 
was not represented at the meeting, made a similar announcement, 
for his road. 

First calling attention to the fact that even if the action in 
New Orleans was obnoxious to the Federal anti-trUst statute, remedial 
proceedings could only be brought by the United States through 
the proper United States District Attorney on the authority of the 
United States Attorney-General, the court proceeded ot express its 
opinion of the action at that meeting. Changing slightly the order 
of paragraphs, the language of the opinion is in part as follows: 
"We are of the opinion the action taken in New Orleans was not in 
violation of the provisions of the act of July 2, 1890, known as the 
Sherman Anti-trust Law. * * * It is sufficient to say that we do 
not find from the record that the proceedings at New Orleans took 
-the shape of an actual contract, capable of legal enforcement by 
either party, but it was a simultaneous declaration of the same 
policy which had already been practiced by each company, and 
this declaration by each was made in and for the consideration of 
the fact that rates had already been fixed by the keenest competition. 
* * * We think the maintenance of uniform, reasonable rates a 
matter of the highest importance to both shippers and carriers, and 
on the other hand the prevention of cut rates and discrimination is 
equally important to both. The carrier is worthy of his hire, that 
is, to receive, reasonable compensation for his services and risk. 
While the shipper is entitled, in the first place, to reasonable rates 
for the service rendered him, and in the next place, to have the same 
rates, no more, no less, than other shippers, so, the shipper is not 
entitled to receive, nor the carrier to give,, directly or indirectly, 
rebates and concessions to some which are not given to others." 

After quoting with satisfaction the utterance of the United 
States Supreme Court in the Joint Traffic Association case as to the 
propriety of harmonious action with reasonable rates, by com- 
petitors, without contract, the court says: "In order to obtain 
relief in courts of equity, it must appear, not simply that there is 
a concert of action [among natural competitors], but that its direct 
and immediate effect is to restrain commerce and trade, and not merely 
that it may be hereafter used for that purpose by a departure from 
its ^present purposes and practices, and there need be some special 
ground for equitable interference. * * * Now, if it had been 
made to appear that in consequence and as a result of this declaration 
or agreement [at the New Orleans meeting] rates had advanced, or 
any injury had resulted, or any shipper had been prejudiced, or that 
such was the purpose of the declaration or its direct and immediate 
result, it would have been clearly illegal, and an attempt to 
execute and enforce it could by a proper proceeding have been pre- 
vented, but if the declaration was simply an expression of a right 
which the carriers had without such declaration, and not made for an 
illegal purpose, and did not operate prejudicially to shippers, such 
declaration would not be unlawful." 



192' TRUSTS OR COMPETITION? 

SUPREME COURT OF MICHIGAN ON MONOPOLIES. 

In the case of Richardson vs. Buhl (the Diamond Match Gase), 
the Supreme Court of Michigan said: 

Monopoly in trade or in any kind of business in this country is 
odious to our form of government. It is sometimes permitted to aid 
the government in carrying on a great public enterprise or public 
work, under government control, in the interest of the public. Its 
tendency is, however, destructive of free institutions and repugnant 
to the instincts of a free people, and contrary to the whole scope and 
spirit of the federal constitution, and is not allowed to exist under 
express provisions in several of our state constitutions. Indeed, 
it is doubtful if free government can long exist in a country where 
such enormous amounts of money are allowed to be accumulated in 
the vaults of corporations to be used at discretion in controlling 
the property and business of the country, against the interest of the 
public and that of the people, for the personal gain and aggrandize* 
ment of a few individuals. It is always destructive of" individual 
right, and of that free competition which is the life of business, 
and it invites and perpetuates one of the great injuries which it 
was the object of the framers of our form of government to eradi- 
cate and prevent. It is alike destructive to both individual enter- 
prise and individual prosperity, whether conferred upon corporations 
or individuals, and, therefore, public policy is and ought to be, as 
well as public sentiment, against it. All combinations among per- 
sons or corporations for the purpose of raising or controlling the 
prices of merchandise, or of any of the necessaries of life, are 
monopolies and intolerable, and ought to receive the condemnation 
of all. courts. 

ILLEGALITY OF THE SINGLE CORPORATION TRUST. 

Charles Fisk Beach, Sr., in his Standard Work, "Monopolies 
and Industrial Trusts" (1898), says, under the head of Trust Com- 
binations: 

The decisions and legislation adverse to the "trust" proper have 
led to a variety of combinations which are of the nature of a trust, 
but are designed to conform to the requirements of the law. The 
design of these combinations is to secure the ends answered by the 
trust, while avoiding the methods which have rendered the trusts 
illegal as in contravention of public policy and void. But the numer- 
ous schemes of this character have not been largely successful; as 
the ends sought are essentially illegal, condemnation is not escaped 
by a change of methods. These combinations appear under a 
variety of forms. But whatever phase they may assume, the object 
is to suppress competition, or to regulate the production and sale 
of some article-, of necessity or of some commodity that is in general 
use. 

LABOR COMBINATIONS AND COURTS. 

The United States Supreme Court, in deciding the Debs case (in 
re Debs, 158 U. S. 564), said: 



COURTS AND LABOR COMBINATIONS. 193 

The right of any laborer or of any number of laborers to quit work 
was not challenged. The scope and purpose of the bill was only 
to restrain forcible obstructions of the highways along which inter- 
state commerce traveled and the mails are carried, and the facts set 
forth at length are only those facts which tended to show that the 
defendants were engaged in such obstructions. A most earnest and 
eloquent appeal was made to us in eulogy of the heroic spirit of 
those who threw up their employment, and gave up their means of 
earning a livelihood, not in defense of their own rights, but in sym- 
pathy for and to assist others whom they believed to be wronged. 
We yield to none in our admiration of any act of heroism or self- 
sacrifice, but we may be permitted to add that it is a lesson which 
cannot be learned too soon or too thoroughly, that under this govern- 
ment of, and by the people, the means of redress of all wrongs are 
through the courts and at the ballot box, and that no wrong, real 
or fancied, carries with it legal warrant to invite as a means of re- 
dress the co-operation of a mob with its accompanying acts of vio- 
lence. 

And the Supreme Court of Virginia, in deciding the case Crump 
vs. Commonwealth, 84 Va. 927,941, said: 

It matters little what the means adopted by combinations formed 
to intimidate employers or to coerce other journeymen if the design 
or the effect of them is to interfere with the rights or to control the 
free action of others. No one has a right to be hedged in and pro- 
tected from competition in business; but he has a right to be free 
from wanton, malicious and insolent interference, disturbance or 
annoyance. Every man has a right to work for whom he pleases, 
and for any price he can obtain; and he has a right to deal with and 
associate with whom he chooses; or to let severely alone, arbitrarily 
and contemptuously, if he will, anybody and everybody upon earth. 
But this freedom of uncontrolled and unchallenged self-will does not 
give or imply a right, either by himself or in combination with 
others, to disturb, injure or obstruct another, either directly or 
indirectly, in his lawful business or occupation, or in his peace and 
security of life. Every attempt, by force, threat, or intimidation, 
to deter or control an employer in the determination of whom he will 
employ or what wages he will pay^is an act of wrong and oppression; 
and any and every combination for such a purpose is an unlawful 
conspiracy. The law will protect the victim and punish the movers 
of any such combination. In law the offense is the combination for 
the unlawful purpose, and no overt act is necessary to constitute it. 
* * * A wanton, unprovoked interference by a combination of 
many with the business of another for the purpose of constraining 
that other to discharge faithful and long tried servants, or to employ 
whom he does not wish or will to employ (an interference intended 
to produce, and likely to produce, annoyance and loss to that busi- 
nesas) will be restrained and punished by the criminal law as oppres- 
sive to the individual, injurious to the prosperity of the community, 
and subversive of the peace and good order of society. 



13 



CHAPTER VII. 
THE STANDARD OIL TRUST. 

Historical Sketch and Defense — Origin and Development— Purposes of Its 
Founders— Methods Pursued and Results Accomplished— Discrim- 
inating Railroad Rates — Treatment of Competitors— Improvement and 
Cheapening of Product— Editorial Comment— The Marietta Trans- 
portation Episode — Some Conclusions. 



At the request of -the editor Mr. S. C. T. Dodd, solicitor of the 
Standard Oil Trust, has furnished for the present use a very full 
historical sketch and a defense of that well advertised concern, a care- 
ful synopsis of which follows. Most of the material was used by 
Mr. Dodd on a former occasiou but facts are added bringing it 
down. to date. It is believed that such an authentic statement from 
the legal representative of the greatest of the trusts will have value. 
Where facts are stated as such they are unquestionably trustworthy. 
Where opinions or conclusions are given each reader will make his 
own allowance for the naturally favorable bias of the author* Mr. 
Dodd prefaces his sketch with some general comments upon the sub- 
ject of trade combinations which are of interest. For example: 

Of Trade Combinations Generally. — "Whatever else may be said 
of combinations of railroads, telegraph lines, and manufacturing 
companies, statistics will show that increased trade and lower price® 
follow as an almost inevitable result. I shall show that so far from 
the Standard Oil combination being an exception, it can exhibit an 
increased trade and reduction in prices as a result of combination to an 
almost unprecedented extent.* * * It is assumed, in all attacks 
upon combinations, that their purpose and end is to reduce supplies 
and increase prices or in some similar way to injure the public. There 
is no charge made against combinations which has so little founda- 
tion as this. It is the very reverse of the truth. Take the' statistics 
of any important business for the past twenty years and it will be 
found that the effects of large combinations have been to increase 
trade, decrease prices and to benefit the public. * * * No legis- 

194 



THE STANDARD OIL TRUST. 195 

lature can interfere with freedom of combination for legitimate pur- 
poses without striking trade and commerce prostrate at its feet. 
The right of association must be free; the magnitude of association 
must correspond with the magnitude of the business to be done; 
business can no longer be localized; it cannot be confined by state 
lines; when the problem is to open and keep open the markets of the 
world, it is sheer madness to attempt to restrict the business as 
that of a local manufacturer may be restricted. 

"* * * When I speak of unrestricted combinations I do not 
mean that combination should be allowed under all circumstances 
and for all purposes. While combination is not per se evil, its pur- 
pose may be. The law T is possibly our best guide on this subject. 
It has progressed as experience, and the necessities of business re- 
quired, from the idea that all combinations were wrong to the idea 
that all persons should be left free to combine for all legitimate 
purposes. To this day, however, the law is properly very jealous of 
certain classes- of combinations, such as (1) where the parties com- 
bining exercise a public employment, or possess exclusive privileges, 
and are to that extent monopolies; (2) where the purpose and effect 
of the combination is to 'corner' any article necessary to the public; 
(3) where the purpose and effect of a combination is to limit produc- 
tion and thereby to unduly enhance prices; these things are illegal 
and properly so. The mistake of writers on trusts and combinations 
consists in assuming that all combinations are for such purposes, 
whereas the purpose and effect of most combinations is just the re- 
verse of this, namely, to lessen the cost of production, increase the 
amount of consumption, and distance competitors by selling at less 
prices. * * * The well-known Coal cases and the Salt cases 
were arrangements with the direct and avowed purpose of destroy- 
ing all competition, diminishing supplies and raising prices. These 
things are just as unlawful without combination as with it. In 
other words, the evil is not in combination but in its purposes and 
results. 

«* * * j n reviewing the history of the Standard combination, 
I expect to demonstrate (1) that the necessities of the business 
demanded association on a large scale; (2) that the business has 
always been competitive both at home and abroad; (3) that the 
combination has constantly cheapened manufacture and improved 
the manufactured products; (4) that it has increased the demand 
and diminished prices to an extent unparalleled in any other busi- 
ness; (5) that, in short, it has furnished oil at the lowest possible 
prices at home and built up an American trade of $50,000,000 a 
year abroad, which it maintains against the fiercest competition/' 
[from the Russian oil fields.] 

HISTORICAL SKETCH^ORIGINAL ALLIANCE, 1872. 

For some time after the discovery of petroleum in 1859, the' 
crude article was simply distilled, and the result was a product both 
unsatisfactory and dangerous in use. Improvements were gradually 
made, several new products discovered, hundreds of patents ob- 
tained and hundreds of refineries were established in the oil region. 



196 TRUSTS OR COMPETITION? 

The latter were almost invariably cheap and small. In the larger 
cities more extensive refineries were built, with more expensive and 
complete equipments of machinery. All the refineries were competi- 
tive, and although for a time the business prospered, yet for many 
years the history of the refining business was, for the most part, 
one of disaster, failure and bankruptcy. Until 1872 the price of oil 
was above 25 cents per gallon. At times it sold as high as 50 cents; 
still refiners on the whole made little money. Now a fair profit is 
made on oil* selling at 7 cents per gallon, and the quality is far bet- 
ter. This result has largely been accomplished through the efforts 
of the Standard Oil Combination. 

The Standard Oil Company of Ohio, with a capital of $1,000,000 
was organized in 1870. It was one of several wholly independent cor- 
porations formed to engage in the relatively new and undeveloped 
business. Another Standard Oil Company had previously been or- 
ganized in Pittsburg, by other parties, and was doing a large busi- 
ness. The other leading independent concerns were the Cleveland 
Standard Refinery, The Pittsburg Refinery, the Atlantic Refining 
Company, of Philadelphia, and Charles Pratt & Company of New 
York. Owing to the disastrous history and condition of the business 
^and its hazardous nature, these companies in 1872 entered into an 
alliance and this alliance formed the basis of the subsequent Stand- 
ard Oil Trust. This combination was not an unusual thing. Re- 
finers' combinations, of greater or less extent, had been previously 
formed, but all were short-lived. The cost of packages and trans- 
portation had been an important factor in ruining the business. 
At first oil was barreled at the wells and hauled in wagons to the 
railroads. Later on, the underground pipe-line system was adopted, 
but even up to 1872 it cost 50 cents to transport a barrel of oil ten 
miles by pipe-line. Railroad rates were excessive and lacking in uni- 
formity. When refiners were able to combine and throw a large 
volume of business to any particular road they could get favorable 
railroad rates. Those who could not do this got such rates as they 
could. The rebate and" drawback system was then universal, and 
was not confined to oil. Undoubtedly this fact had much to do with 
the combination of refiners above referred to, and which came to be 
known as the Standard. But it was by no means the only reason. 
The men in control of that combination foresaw that a business 
which had thus far been disastrous would require co-operation on 
a large scale and for several reasons. 

Purposes of its Founders. — Without assuming that they foresaw 
clearly all the results of their combination, yet judging from what 
has been accomplished, their purposes may be stated thus: 

1. To cheapen the cost of transportation, both local and to the 
seaboard by perfecting and extending the pipe-line system; by con- 
structing and supplying cars by which oil might be shipped in bulk 
at less cost than in packages, and the cost of packages be also 
saved; by building tanks in which oil could be stored in bulk; by 
purchasing and perfecting terminal facilities for receiving, handling 
and re-shipping oils; by purchasing or building steam-tugs and 
lighters for harbor and river service; by building wharves, docks 
and warehouses for foreign shipment. 



GENESIS OF THE STANDARD TRUST. 197 

2. To manufacture a better illuminant at less cost by combining 
the knowledge, experience and skill of all the parties to the com- 
bination, as well as their various secret processes and their patents, 
and by building up manufactories on a more extensive and perfect 
scale with the latest improvements in machinery and appliances. 
To unite with the business of refining, the collateral business of 
manufacturing barrels, tin cans, boxes for enclosing cans, paint, 
glue and sulphuric acid, and to cheapen these necessary materials 
by producing them on a large scale with the best machinery; to ob- 
tain and employ the best scientific skill in investigating and experi- 
menting upon the best methods of obtaining new and useful prod- 
ucts from petroleum, and to cheapen illuminating oils by obtaining 
profits from these by-products; to employ agents and send them 
throughout the world to open up new markets, learn the cheapest and 
best methods of supplying them, and to convince the people of all 
lands of the cheapness and safety of petroleum oils; finally, by all 
these means to increase the supply of oil products and lessen their 
price to consumers generally. 

All these things the Standard Combination has been doing 
through all the years that have followed its organization. To ac- 
complish these great purposes combination was absolutely , indis- 
pensable. No one man or corporation could have accomplished it. 
It meant millions of money. The pipe-line and storage system alone 
required $30,000,000. 

FORMATION OP THE STANDARD TRUST. 

The associated corporations engaged in refining carried on the 
business for nine years without any further consolidation. It was 
a union, not of corporations, but of their stockholders. The several 
companies continued to conduct their business as before. They 
ceased to be competitive with each other in the sense of striving 
to undersell each other. They continued to be competitors in the 
sense that each strove to show at the end of each year the best re- 
sults in making the best products at the least cost. From time to 
time new persons and additional capital were taken into this associa- 
tion. Whenever and wherever a man showed himself skillful and 
useful in any branch of the business he was sought after. As busi- 
ness increased new corporations were formed in various states, in 
the same interest, some as trading companies, others as manufactur- 
ing companies. 

Then, for convenience of control and management the Standard 
Oil Trust was formed. It was simply an agreement placing all of 
the stock of these various companies in the hands of trustees, de- 
claring the terms on which they were held and providing for the 
issuance of a certificate showing the amount of each owner's interest 
in the stock so held in trust. This agreement did not in any essen- 
tial manner change the nature of the association previously existing. 
Its essential character was simply a common ownership of stock in 
various corporations. If they had so preferred, the owners of these 
several associated companies could have organized, in the state of 
New York, for example, with any capitalization desired, each could 



198 TRUSTS OR COMPETITION? 

then have lawfully combined with all of the other companies, forming 
one corporation to transact business wherever desired. But it seemed 
preferable instead- of organizing one corporation in New York, to or- 
ganize a corporation in each state where business was being carried 
on, so that the business transacted in each state might be conducted 
by a home corporation subject, in all respects, to the law of the 
state where located. Accordingly we organized a Standard Oil Com- 
pany in New York, in New Jersey, in Kentucky, in Iowa, in Minne- 
sota, and similar corporations already existed in Ohio and Pennsyl- 
vania. The business of each state was thus, as far as possible, 
transacted by a corporation organized under the laws of that state, 
subject to its jurisdiction, paying taxes there, and usually officered 
by citizens and residents of the state. If this government were a 
unit instead of a federation of states, there probably would have 
been no Standard Oil Trust. 

Increased Product and Lowered Prices.— ^Bearing in mind that oil 
was discovered in 1859, the co-operation or combination of refiners 
above referred to began in 1872, and the Standard Oil Trust was or- 
ganized in 1881, in 1870 the production of oil was about 5,000,000 
barrels, and the consumption about equal; price of crude oil at the 
well, $3.86 per barrel; price of export oil in New York, barrel in- 
cluded, $11 per barrel. At the close of 1881 the consumption of oil 
had increased to over 19,000,000 barrels per year; the price of export 
oil at New York had decreased to about $3.36, which, estimating 
the package at $1.50 per barrel, leaves $1.86 as the price per barrel 
of the oil and yet the value of the exports amounted to over $40,000,* 
000, showing an enormous increase in the trade. 

Notwithstanding the wonderful decrease in the price and in- 
crease in the output up to this time, the decrease in price and increase 
in supply did not cease. At the close of 1887, six years after the 
creation of the trust, the supply to the markets had increased to 
over 26% million barrels of. 42 gallons each per year; the price of 
crude material reduced to an average of 66.66 cents per barrel, and 
the price of 110° "Standard White" to $2.81 per barrel of 50 gallons, 
including the barrel; and notwithstanding the almost nominal price 
of the oil the value of exported products reached the enormous sum 
of $46,824,933. These figures speak for the Standard Oil Company 
as nothing else could do. It has been said that decrease in price of 
refined products is wholly in consequence of the decline in price of 
crude oil. But look at the figures: In 1872 crude oil was 9.43 cents 
per gallon, and refined 23.59 cents per gallon. In 1887 crude oil was 
1.59 cents per gallon, or 7.84 cents less than in 1872. Had refined 
products been reduced only to the same extent it would have been 
15.75 cents per .gallon in 1887; but it was only 6.72 cents per gallon. 
The difference, 9.03 cents per gallon, represents the reduction in 
price of the refined product after eliminating the effect of the decline 
in crude oil. The prices of all other products of petroleum were re- 
duced in the same proportion and as over one thousand million of 
gallons of the crude oil were consumed in 1887 this reduction in the 
cost of refined products after the allowance for the reduction in 
the crude benefited the public to the extent of about $100,000,000 
for that single year. For this the Standard claims its due proportion 
of credit. 



DISCRIMINATING RAILROAD RATES. 199 

Cheapening of Transportation.— In 1872 the pipe-line system was 
in its infancy. A number of local lines existed. Their service was 
inefficient and expensive. There was no uniform rate. The United 
Refiners undertook to unite and systematize this business. They 
purchased and consolidated various little companies into what was. 
long known as The United Pipe-Line^ System. The first effect of this 
combination was a reduction of prices of all local transportation to 
a uniform rate at first of 30 and soon after of 20 cents per barrel. 
The pipes were placed at every well. A storage system was also 
adopted. Great iron tanks were built in which oil could be stored 
on the way to market. The cost of storage has been reduced until it 
is now cheaper than for any other commodity. Certificates were 
given to all producers, showing the amount of oil stored by each 
and these certificates have become practically as current as money 
and are dealt in at the New York Stock Exchange. 

The benefit to the oil trade from these improvements has been 
incalculable. Instead of the" Standard being the sole buyer, the 
buyers are numbered by thousands. The producer not only gets the 
highest price which competition in purchase will bring, be gets also 
cash in hand.. 

The figures show that in one year the production of oil exceeded 
31,000,000 barrels, or 9,000,000 barrels in excess of consumption. 
Consider what this means. Every day of that year iron tankage had 
to be built to accommodate 25,000 barrels of surplus oil. This meant 
an army of iron workers and tank builders, at a cost per day of 
$7,500. Without aggregated capital, without combination of money 
and effort how could all this have been done? 

About 1879 it was discovered that the railways were inadequate 
to the task of getting the oil to the seaboard as rapidly as shipped. 
Combined energy and capital alone were equal to the emergency. 
To-day there reach from Pennsylvania and New York to the cities 
iron pipes conducting the oil as it comes from the- wells. Two such 
pipe lines reach New York harbor with a capacity of 25,000 barrels 
per day. There is one such line to each of the cities of Philadelphia, 
Baltimore, Cleveland and Pittsburg, built by the Standard Oil Com- 
bination at a cost of millions and doing business for the public. 

Discriminating Railroad Rates. — The one burden of charges 
against the Standard is that it has received special rates from the 
railroads which enabled it to distance its competitors. There is 
more ground for this than for any other charge made against the 
Standard Oil Trust. The necessity in some way of improving and 
cheapening transportation was a strong inducement to the original 
combination. There were competing roads and it was found that 
those who could ship in large and uniform quantities could have 
special rates. It was then the universal mode of business. The 
man who could not avail himself of it might as well retire from 
business. The Standard availed itself of this mode of business. It 
could furnish the railroads with, not carloads but train loads of oil. 
Also it built loading stations and loaded trains by its own labor. It 
built terminal stations where it received and unloaded trains itself. 
It became its own insurer and released railroads from any obligations 
for damages. It found that the country had not white oak forests 



200 TRUSTS OR COMPETITION? 

enough to furnish material for making barrels for all the oil to be 
shipped, and it experimented on car after car for carrying in bulk. 
When the proper car was furnished it constructed thousands and 
placed them on the railroads. For these services it demanded and 
obtained low and lower rates. It is true the Standard often got a 
special rate. The railroads refused to carry oil for the same prices 
for those who shipped in packages, carloads or less than carload lots, 
who did not do their own loading or unloading or furnish their own 
cars or terminal facilities. 

The Interstate Commerce Commission has now decided that 
every pound of oil is entitled, whether carried in barrels or in bulk, 
to reach the market at equal rates. This is founded on the modern 
idea that energy and enterprise and capital are not entitled to ad- 
vantage in competition. The race is not to the swift nor the battle 
to the strong. Controlled by such ideas there is no benefit to the 
public. All are placed on a dead level. The unfittest as well as the 
fittest survive. Whether this is or is not the correct principle, the 
result is to-day that all shippers by all modes are charged the same 
rate per pound. 

Cheapening the Cost of Manufacture.— The Association of Re- 
finers united the best knowledge and skill in the business. If one 
had a patent it was open to all. If one had a secret the others 
shared it. Methods were compared. New plans were tested. Re- 
sults were and are carefully collated. If one establishment succeeds 
in saving the fraction of a cent per barrel in making oil the reason 
is known and the method of saving adopted. If good results are 
obtained in one manufactory and bad results in another, the reason 
is at once discovered and faults corrected. Scientific men are con- 
stantly employed who have made useful discoveries in new products 
and new methods of manufacture. The consequence of all this is 
that since 1872 the actual cost of manufacture of refined oil has been 
reduced 66 per cent. The public have the advantage of this in the 
reduced price at which the oil is sold, which benefit amounts to mil- 
lions annually. 

The same cheapening of cost, has taken place in the manufacture 
in our own factories of barrels, tin cans, boxes for enclosing cans, 
paint, glue and acid. In 1872 barrels cost the trade $2.35. They now 
cost us $1.25, representing a .yearly saving of $4,000,000. Cans then 
cost 30 cents each, now 15 cents, making a saving of $5,400,000 a 
year. In 1874 wooden cases cost 20 cents each, now 13 cents, or a 
saving of $1,250,000 a year. A like cheapening has taken place in 
the manufacture of tanks, pumps and everything used in the busi- 
ness. All these millions are saved by economies which combinations 
of persons, capital, experience and skill render possible, without re- 
ducing the wages of a single laboring man. 

By-Products of Petroleum. — After illuminating oil is manufac- 
tured from the crude petroleum, a large residuum is left. Up to 1875 
this was almost exclusively used as fuel at the refineries. The 
Standard devoted special attention to this residuum, sending experts 
to the shale works of Scotland, and prosecuting exhaustive investiga- 
tions on all lines. As a consequence, extensive works were erected 
for the manufacture of products from this residuum, principally 



NEW MARKETS-RUSSIAN COMPETITION. 201 

lubricating oils and paraffin wax. These works are extensive and 
manufacture the residuum of a large number of refineries. Small 
refineries cannot advantageously engage in this branch of business 
and cannot afford to manufacture illuminating oils unless they can 
dispose of their residuum. This is one of the reasons why so many 
small refineries prove failures. The cost of manufacture of lubri- 
cating oils and wax has been reduced by improved methods and 
constant attention, and the price to the consumer has been constantly 
reduced, averaging to-day 50 per cent less tlian in 1878. Illumina- 
ting oils were introduced to the public with comparative ease because 
they met an urgent need, but lubricating oils were slow of recogni- 
tion, having to supplant sperm, lard and fish oils, and in Europe the 
products of shale had to be competed with. 

Opening New Markets. — To bring consumption up to the level 
of the enormous production, * something besides good quality and 
cheapness was necessary; new markets had to be opened. When 
the Standard combination was formed twelve years had elapsed 
and the world was using less than six million barrels per annum, 
and of that three and a half million barrels were exported. In two 
years afterwards the exports were nearly six million barrels. The 
reason for this remarkable change was that no single refinery could 
afford to keep agents in Europe to demonstrate the advantages of 
this product, obtain the means for its convenient and safe trans- 
shipment and force it upon the trade. The refineries when combined 
could do it, did do it and continue to do it. The consequence is that 
petroleum is to-day the peoples' light throughout the world. It is 
carried wherever a wheel can roll' or a camel's hoof be planted. 

The Great Russian Competition. — The development of the great 
oil lieids on the shores of the Caspian Sea began about 1872 when 
the oil lands passed into private hands. In 1879, 195 refineries 
existed with a capacity of 1,400,000 barrels annually. It was then 
recognized that combinations of men and capital were necessary to 
make success in the business and Nobel of Paris put in $2,500,000. 
All of American experience was utilized; pipe-lines built, 2,500 tank 
cars placed on the railroads, large stationary tanks, warehouses and 
docks were erected, ships constructed carrying oil in bulk, and case 
and can factories were established. In a word, Standard Oil enter- 
prise and methods were closely imitated along the shores of the 
Caspian. Since that date Russian competition has to be fought in 
every portion of the Eastern Hemisphere. Russian oil is sold in 
American packages under American trademarks. The crude product 
is cheaper than water, varying from two to six cents per barrel. It 
is rich in lubricating oils of a good quality. Its refuse is used for 
fuel on the ships which transport it. The Rothschilds have taken hold 
of the business. Enlarged capital and energy have been enlisted. 
These must be met with enlarged capital and energy or our foreign 
trade of 50 millions annually will be greatly impaired. Had this mat- 
ter been left to individuals to be met without combination or unity 
of effort, Russia to-day would control all the markets of the east. 
Pass a law that persons in the same business cannot agree upon 
prices or co-operate in their business and in five years instead of the 
annual income of $50,000,000 from oil exports, you will not have 



202 TRUSTS OR COMPETITION? 

$10,000,000. Without the pipe-line system, the cheap transportation, 
and the improvements herein mentioned, the markets of Europe and 
Asia could not be held against Russia for a single year. 

Causes of Criticism. — Such is briefly the history of the rise, prog- 
ress and results of the business of the United Refineries, popularly 
known for many years as the Standard Oil Company and later as 
the Standard Oil Trust. In relation to the companies represented 
in this union, they have been guilty of no stock jobbing and no 
watering of stock; no creditor has suffered; their business obligations 
are strictly fulfilled; labor is amply rewarded and it has an unparal- 
leled record of satisfactory relations with its army of 25,000 employes. 
What then are the causes which have led to. the popular opinion that 
the Standard Oil Trust is a gigantic monopoly which must be 
crushed? (1) The principal reason is at present that there is in 
the air a socialistic prejudice against capital. (2) On account of its 
aggregation of large capital the Standard serves as a type, in the 
public estimation, of a modern monopoly crushing out all competition. 
It is not and never has been a monopoly in any sense of the word. 
It does not possess a single exclusive franchise or special privilege. 
All the corporate privileges it possesses are open to all persons and 
may be obtained by simply making and filing a paper stating a desire 
to be incorporated. 

Neither has the Standard ^destroyed competition. In 1872, the 
date of the inception of this union of refiners, the total amount of 
crude oil refined was about five and a half million barrels annually. 
Of this business the refiners who ultimately became associated in- 
the Standard Trust did by far the greater proportion. Competition 
at home and abroad has never ceased for a single instant and has 
always been strong enough to give the public all the advantages 
which competition confers. Now, in 1899, of the total amount of oil 
refined in the United States, companies which are in competition 
with the Standard do 17.7 per cent. 

All the competing refineries have benefited by the Standard's 
efforts at improvement and by its money expended in the establishing 
of markets. Many refineries have failed. Competition has simply 
moved to a higher plane. Those who could not or would not follow 
business in its new lines could not succeed. Thousands of those 
who enter the business are doomed to failure no matter what the 
circumstances; no refiner has failed without damning the Standard. 

Referring again to the complaints against the Standard, and 
their^ contradictory character— one is, in effect, that the Standard 
sold its products so low, kept the margin between crude and refined 
oils so close that competitors could not make money and were crushed 
out; the other was that the Standard sold too high and made too much 
money. Both views cannot be true. The fact undoubtedly lies between 
the two. The Standard's methods of business have been such that it 
could sell oil products at figures too low for many competitors and 
still make a fair profit for itself. If those methods of business 
are justifiable which secure the greatest good to the greatest num- 
ber, this surely cannot be condemned. 

; Another reason for the popular protest against the Standard 
arises from the complaints of oil producers or well-owners for many 



SOME EDITORIAL COMMENT. 203 

years that the Standard for its own purposes kept down the price of 
crude oil. On the contrary the storage and certificate system by 
which the producers sell their oil on exchanges to thousands of buy- 
ers instead of a few must have tended to better prices. That system 
was adopted and maintained at the request of producers and without 
it their business could not be carried on. All-the Standard's efforts 
above recorded to cheapen manufacture and transportation and force 
products on home and foreign markets must have greatly benefited 
oil producers. With forty million barrels of surplus stock in tank 
how could good prices be expected ? ■ 

But it is said that the Standard has speculated in these certifi- 
cates and sent the market up or down as it wished. This is em- 
phatically denied. It has not speculated. It has purchased what it 
needed and used what it purchased. It has bought largely at times 
to save the market from absolute ruin, and for some years, for like 
reasons, has carried a large part of the stock of oil at a loss to itself 
of millions. 

Public statistics show that the price of crude oil has been gener- 
ally governed by the law of supply and demand. Speculation has 
made the public buyers and held prices somewhat higher than they 
would otherwise have been. At times speculation may have depressed 
prices. But the average tells the story. All now admit that over- 
production has caused all the trouble The oil producer now knows 
and admits that his charges against the Standard in 1878 and many 
subsequent years were baseless and unjust. But the influence of 
those unjust charges and the accompanying public excitement is 
prejudicing the public to-day as the waves caused by a storm 
at sea will fret distant shores long after the storm is over. 

Mr. Dodd closes his statement as follows: 

"I have dwelt aT length upon the history of the Standard because 
it is always referred to as embodying all the evils of combinations 
and trusts. And yet the facts show that it, or some similar combina- 
tion of persons and capital, was and is essential to the building up and 
maintenance of the American oil trade; that its destruction would 
be the destruction of that trade; that it has furnished the producer 
a cash market and the best possible price for his oil, and that it is 
benefiting the public by actual reduction in cost of manufacture and 
prices to the extent of more than its aggregated capital each year. 
Let the state or national legislature provide a better mode for carry- 
ing on this business if they can, but let them not despoil the structure 
until a better is provided to take its place." 

COMMENT. 

Mr. Dodd presents one side of the shield. Probably the other 
side would not be so bright. Without entering upon the long 
and bitter controversy over the vices and virtues of the Standard 
Oil Trust, this may be said: From Mr. Dodd's statement it is 
evident that during the years when the Standard was crushing 
out all formidable competition it availed itself of every lawful 
advantage, particularly in the matter of transportation. That its 



204 TRUSTS OR COMPETITION? 

policy against all rivals, and especially the weak ones, was ruth- 
less and unscrupulous to an unprecedented and indefensible de- 
gree is charged by the vanquished refiners and their friends and 
is apparently confirmed by the official records. It is seldom that 
a secret, unfair and unlawful combine between a railway and a 
favored shipper is judicially exposed. When one such exposure 
occurs it is therefore proper to accept the showing as an index 
to the general policy and the moral standards of the parties in- 
volved. This rule applies to the trial of the well-known case at 
Marietta, Ohio, in 1885, of Parker Handy and John Paten, trus- 
tees vs. the Cleveland & Marietta Railroad and others. This case 
is pretty fully stated from the public records in Prof. Richard T. 
Ely's "Problems of To-day," page 203, and more fully in Hud- 
son's "Railways and the Republic," under the title, "A Commer- 
cial Crime." Briefly, the railroad in question was in the hands 
of a receiver, P. Pease. The Standard Oil Company owned or 
controlled pipe lines\ by means of which it collected and piped 
the oil procured by it in the vicinity of Macksburg, Ohio, a sta- 
tion on said road, to be carried thence by rail either to Cleveland 
or Marietta, It thus controlled a large amount of freight, which 
Receiver Pease was naturally desirous of securing. The Stand- 
ard Oil Company, through its general manager, O'Day, demanded 
that the railroad give it a rate of 10 cents per barrel on oil from 
Macksburg to Marietta, while the rate charged all other re- 
finers at that time was 17% cents. This demand was accom- 
panied with the intimation that the Standard would lay a pipe 
line from Macksburg to Marietta if the discriminating rate was 
not conceded. The receiver granted the 10-cent rate, thus giv- 
ing to the Standard an advantage of 75 per cent in transportation 
cfiarges over all its competitors at Marietta. But this was only 
the beginning. The next chapter is best told in the language of 
Receiver Pease, in his letter to Edward S. Rapallo, general 
counsel for the receiver, 32 Nassau street, New York, under date 
of February 25, 1885. The next demand of the Standard was 
so extraordinary that the receiver, being practically an officer of 
the court, felt bound to fortify himself with a legal opinion 
before yielding. In the course of his letter to Rapallo he says: 

"Mr. O'Day, manager of the Standard Oil Company, met the 
general freight agent of the W. & L. E. Railroad and our Mr. Terry 
at Toledo about February 12, and made an agreement (verbal) for 
the carrying of their oil at 10 cents per barrel. But Mr. O'Day com- 
pelled Mr. Terry to make a 35-cent rate on all other oil going to 
Marietta, and that he should make the rebate of 25 cents per barrel 
on all oil shipped by other parties and that the rebate should be 
paid over to them (The Standard Oil' Company) thus giving us 10 
cents per barrel for all oil shipped to Marietta, and the rebate of 25 



THE MARIETTA EPISODE. 205 

cents per barrel going to the Standard Oil Company, making that 
company save $25 per day clear money on Mr. Geo. Rice's oil 
alone." 

"Mr. Rapallo, under date of March 2, 1885, answered the re- 
ceiver to the effect that the law would not permit the latter 
to collect money from one shipper and pay it over to another, but 
he showed the receiver how he could lawfully reach the same 
result in the following words: 

"You are at liberty to arrange for the payment of a freight by 
the Standard Oil Company calculated upon the following basis, 
viz.: Said company to be charged an amount equal to 10 cents per 
barrel less amount equivalent to 25 cents per barrel for all oil shipped 
by Rice, the agreement between you and the company thus being 
that the charge to be paid by them is a certain sum ascertained by 
such calculation." 

The arrangement was made, and of course, resulted in giv- 
ing the Standard an advantage of more than 300 per cent over 
their Marietta competitors. The receiver was removed by the 
court. The Marietta Leader of November 24, 1885, says: "Judge 
Baxter characterized Rapallo's letter as being 'the most insolent 
paper he had ever known to be presented to a court' * * * It 
is very clear that these enormous discriminations have been dis- 
astrous to our city, for the difference in rate against all inde- 
pendent refiners is so great as to about equal their full profits 
on oil refined, and so their business has been nearly destroyed, 
except that of Mr. Rice, who w^as driven to save himself by the 
construction of a pipe line of his own."' 

Some opponents of the trust system point to this authentic 
case and ask (1) what force can "potential competition" have 
against such an economic bludgeon so wielded? (2) If a con- 
cern like the Standard Oil, owned and officered by men as re- 
spectable as John D. Rockefeller, is capable of devising and 
pursuing such a policy, secretly or openly, what may be ex- 
pected from the new trusts, which, no matter how controlled 
at first, are pretty sure to fall into the management of the most 
forceful and least scrupulous of their future owners? 

President Hadley, of Yale University, in his latest work, 
"Economics," page 159, thus characterizes the methods of the 
Standard and explains the odium encountered by it in a manner 
quite different from Mr. Dodd's. He says: 

"If the managers of a combination make it their chief concern 
to suppress competition rather than to realize economies in pro- 
duction, their policy toward trade rivals results in violation of 
commercial morality, if not of commercial law. Not content with 
obtaining unfair advantages in the way of discriminating rates 



206 TRUSTS OR COMPETITION? 

for the transportation of its goods, the combination tries to ex- 
clude its rivals from their accustomed markets by methods of 
boycotting and intimidation, which, when they are used by trade 
unions, provoke fierce denunciation from the same men who have 
Jbeen ready to practice them for their own advantage. Even among 
those combinations which, like the Standard Oil Company, have 
realized economies and reduced rates [prices] for their product, this 
unscrupulous policy toward competitors has been carried to such 
an extent as to create a just prejudice against them, a prejudice 
which is enough to explain, and in one sense to justify, the ten- 
dency on the part of the public to ignore or depreciate the indus- 
trial services which they have actually rendered." 

Possibly the American people would willingly have paid a 
trifle more per gallon for their kerosene and witnessed a less rapid 
growth of the export oil trade if by that slight sacrifice they could 
have avoided for themselves and posterity a conspicuous and con- 
tagious example in commercial immorality. 

Concerning one or two of Mr. Dodd's statements as to the law 
and the economics of trade combinations, a critical person might 
make these comments: (1) He says, "The well-known Coal cases 
and the Salt cases were arrangements with the direct and avowed 

purpose of destroying all competition These things 

are just as unlawful without combination as with it. In other 
words, the evil is not in combination, but in its purposes and re- 
sults." The statement is inaccurate. In order to be contrary to 
public policy and hence illegal a combination for suppressing 
competition need not have that "avowed" purpose; the known char- 
acter, the natural tendency and the results of a course of action 
are conclusive evidence of its legality or illegality without any 
avowal of purpose, as instance the Marietta j2ase, cited above. 
(2) Such a -combination or course of action, in order to be illegal, 
need not in aim or in fact destroy all competition. It is in practice 
almost never possible literally to destroy all competition in any 
trade or industry, and it would never be good policy to do so even 
if possible. It would cost too much in money, in public ill-repute, 
and in legal peril. Judging the course of action of the Standard 
by its known character, its natural tendency and its results, that 
company has pursued a policy which, in Mr. Dodd's words, "is 
just as unlawful without combination as with," for, so judged, 
its evident purpose has been to suppress all competition to a point 
which would give it a virtual monopoly of the oil refining industry 
in the United States. Which leads to : (3) Mr. Dodd says, "It 
[the Standard] is not and never has been a monopoly in any sense 
of the word." Let us see. In 1889 the Standard, on Mr. Dodd's 
statement, was doing 75 per cent of the refining in the United 
States. This fact, as every recognized authority will agree, gave 



18 THE STANDARD A MONOPOLY? 207 

it control of the price "up to the importing* point." It also gave 
the power to eliminate, substantially, not literally, the remaining 
competition. Every economist will also agree that this state of 
things constituted a virtual or working monopoly— which is the 
only kind of monopoly an intelligent business man ever cares or 
strives for. But this does not close the case; in 1899, also on Mr. 
DodcTs statement, the Standard is doing 82.3 per cent of American 
refining. If this does not constitute a practical (and progressive) 
monopoly in the only possible economic and commercial sense, 
then economic science will have to be rewritten. Note that the 
question just here is not whether practical monopolies in private 
hands are good or bad, but— do they exist, and if so, is the Standard 
one of them? There is need of clear and candid statement on both 
sides of the trust question. (4) Finally, while giving full credit to 
the record of the Standard's business enterprise and competency, 
it is fair to suggest that practically all of this work of developing 
the oil business, improving methods, cheapening cost of manu- 
facture, reducing price and improving quality of product would 
have been accomplished by other American citizens had the 
founders of the Standard engaged in some wholly different pursuit. 
To compare present prices with prices when the industry was 
young and crude means little. The cheapening was inevitable 
as gravitation. Pipe lines were not originated by the Standard, 
and nearly all the economies in cooperage and manufacture of 
ca-ns, cases, etc., mentioned by Mr. Dodd are equally practiced by 
leading competing refiners. The latter are also supplying oil of the 
same quality and price as the Standard's product. Professor Ely 
remarks that the competitors of the Standard have not been van- 
quished by its superior business ability, but by other and less 
creditable elements in its conduct of the oil refining business. 



CHAPTER VIII. 
THE LAW AND THE TRUSTS. 

Newness of Trust Legislation and Court Decisions— Attitude of American 
Judiciary Toward Monopoly— Origin of Our Anti-Trust Laws— Reasons 
for Their Extreme Provisions— Combination to Compete vs. Com- 
bination to Monopolize— The Common Law. 



Legislation and judicial decisions directly affect- 
ing the modern trusts are naturally as recent in date as 
is the industrial movement which they are designed 
to regulate or repress. Only in February, 1887, did 
Congress take the first formal step to exercise its con- 
stitutional power over interstate commerce by passing 
the measure entitled "An Act to Begulate Commerce," 
and three years later was enacted the present federal 
anti-trust law. In 1889 Maine led off in enacting a 
statute prohibiting such trusts and other trade com- 
binations "as may be contrary to public policy," and that 
example has now (1899) been followed, with all varieties 
of scope and vigor, by twenty-seven other states and 
two territories and by Canada, as will be seen by con- 
sulting the synopses of anti-trust laws in this volume. 
Of those states which have not thus far enacted statutes 
of this general nature, several have anti-monopoly pro- 
visions in their constitutions, and all may have recourse 
to the principles of the common law applied by their 
courts to emergencies as they may arise; a resort which 
seems to have been sufficient for all needs, both of state 
and nation, prior to the advent of the present trust in- 
novation. 

208 



THE LAW AND THE TRUSTS. 209 

The form of trust which gave the name to the sys- 
tem of quasi-monopolistic organizations now under dis- 
cussion was first exemplified here by the Standard Oil 
Trust and is now unlawful and non-existent in the 
United States. That form was suggested by a similar 
method of combination employed for a different pur- 
pose in England more than a half century ago. 

Of both statute law and judicial decisions bearing 
upon this subject, by far the greater part- is to be found 
on this side of the Atlantic. Two causes account for 
this fact: First, both the law and public opinion have 
long been more tolerant of trade combination in various 
forms in Great Britain than in the United States and 
Canada. Second, British lawmakers and courts have 
not been called on to confront and deal with a problem 
corresponding in kind or magnitude to the present trust 
problem in the United States. While, on the one hand, 
English statutes and judicial decisions have been lib- 
eral toward those forms of trade combinations and 
•agreements which have appeared to be reasonable as 
tending to prevent or limit foolish and destructive meth- 
ods of competition, on the other hand, whatever indi- 
viduals may have occasionally attempted, the business 
community in England has never misconstrued that 
liberality by seeking to do away with the competitive 
system and establish in its place a system of practical 
private monopolies. 

The broad and enduring basis of legal prohibitions 
and restraints against the trust is the historic fact that 
what we know as public policy abhors private monopoly, 
as nature is said to abhor a vacuum. In ever} 7 English- 
speaking country since Anglo-Saxon civilization really 
took form this proposition has been true. At common 
law, in all statutes, state and federal, in all sustained 
judicial decisions treating upon the subject and in the 
treatises of all recognized law writers, condemnation 
and reprobation of private monopoly appears as a con- 

14 



210 TRUSTS OR COMPETITION? 

slant and leading factor. That this attitude of the legis- 
lative and judicial mind is in accord with the instincts 
and judgment of the people and is universal and per- 
manent there can be no doubt. This being true, oppon- 
ents of the trusts insist that it is only a question of 
time and detailed method whether any system of private 
monopoly, partial or complete, will be prevented, or 
will be overthrown if temporarily established; that if 
ways do not exist they will be devised or^ created. 

Soon after the Standard Oil Trust reached what 
may be called its early maturity and developed its pe- 
culiar aggressive policy, the possibilities in that direc- 
tion aroused the apprehensions of the people both in 
the United States and Canada. In 1888 investigations 
of the trust problem were ordered by our national House 
of Representatives, by the Senate of New York and by 
the Canadian House of Commons. Largely asi a re- 
sult of the testimony taken and the developments made 
during these investigations, anti-trust legislation was 
enacted by Congress, by the Dominion of Canada and 
by many of our states in the years from 1889 to 1899. 
All these statutes have as a common, central purpose 
the prevention and punishment of monopoly, approxi- 
mate or complete, in private hands. 

Inasmuch as monopoly in trade" is necessarily pro- 
gressive in its development and may have all gradations 
of effectiveness, it was inevitable that the legislatures in 
framing their statutes and the courts in deciding cases 
should deal not simply with the final culmination of the 
monopolizing process or with complete monopoly, but 
should aim their prohibitions at the various measures, 
steps and intentions tending or leading up to such con- 
summation. Accordingly, nearly all anti-trust laws de- 
fine a trust to be a combination or conspiracy in re- 
straint of trade or competition. For example, the fed- 
eral anti-trust act of July 2, 1890, provides that "every 
contract, combination in the form of trust or otherwise, 



DIFFICULTIES OF LEGISLATION. 211 

or conspiracy in restraint of trade or commerce among 
the several states or with foreign nations, is hereby de- 
clared to be illegal. * * * And every person who 
shall monopolize, or combine or conspire with any other 
person or persons to monopolize, any part of the trade 
or commerce among the several states or with foreign 
nations shall be deemed guilty of a misdemeanor." 

One result of the sweeping language thus employed 
in the federal and state statutes is that those statutes, 
by their language, appear to apply to all possible trade 
combinations which in intent or effect, or to any degree, 
restrain or limit competition. Obviously this could not 
have been the purpose of the legislative mind, for there 
are a thousand ways in which business men every day, 
and necessarily, make arrangements and agreements 
which, to some extent, restrain trade and limit com- 
petition. If the attempt should be made to prohibit 
all arrangements of this nature, the wheels of commerce 
and business of every sort would well-nigh be brought to 
a standstill. And this is the chief embarrassment at- 
tending the enactment and enforcement of all legislation 
of this nature; an embarrassment which the federal 
Supreme Court has not escaped, namely, the difficulty 
of drawing a line between trade combinations and agree- 
ments which are reasonable and those which are un- 
reasonable — those which are proper and virtually un- 
avoidable in exercising the freedom of contract and 
transacting business affairs, and those, on the other 
hand, which are clearly contrary to public policy, be- 
cause monopolistic in tendency or intent and hence detri- 
mental to public welfare. 

But out of this temporary confusion of counsels are 
emerging order and consistency. At no time has there 
been any lack of uniformity in the general attitude of 
the highest courts, state and national, in their interpre- 
tation of the principles of the common law, and their 
application to the never-ending controversy between at- 



212 TRUSTS OR COMPETITION? 

tempted monopoly on the one hand and open competi- 
tion on the other. Always and everywhere the trend 
of decisions has been against monopoly in every guise, 
while latterly and until the very recent phenomenal 
development of the trust system there has been a steady 
relaxation of the legal prohibitions upon such forms of 
trade combination and association as seemed reasonable 
in carrying out the details of a competitive system. As 
elsewhere stated, in practically all of the states there 
now exists absolute freedom of association of indi- 
viduals and combination of capital through the forma- 
tion of corporations for all lawful purposes. Also, there 
has been no disposition on the part of lawmakers or 
courts to resist the natural tendency everywhere mani- 
fest toward large-scale production with greater capital, 
when free from monopolistic taint and held within the 
lines of effective competition. The law and the courts 
have treated with tolerance, if not with liberality, the 
tendency to combine for purposes of competition. Rut 
recently the legislatures and the courts have found 
themselves confronted w r ith the necessity of resisting 
the movement toward combination to monopolize. The 
phenomenal and sudden development of the trust sys- 
tem has compelled this apparent change of attitude, 
which, however, is only apparent. The change is in the 
character of the problem to be treated. In this emer- 
gency it should not be cause for surprise, if, in some 
states, the legislative pendulum has temporarily swung 
to the extreme of resisting all combinations which re- 
sult in restraint of competition, even w T hen they are in 
fact reasonable and proper. The anti-trust laws of the 
several states, summarized herein, illustrate this pass- 
ing tendency. In the opinion of some the license exer- 
cised by the organizers of trusts in virtually suppressing 
competition will compel, for a time, a restriction of the 
liberty of all in this, matter of agreeing or combining 
even within the lines of open competition. 



THE GLUCOSE CASE. 213 

Herewith is published a clear statement of the 
scope and bearing of the federal anti-trust statute since 
its interpretation and application by the federal Su- 
preme Court. 

Inasmuch as the turning point in the remedial treat- 
ment of the trust is in connection with the question of 
freedom of contract as impliedly guaranteed by the 
federal constitution, a most thorough and competent 
discussion of this subject is presented in the following 
pages, as furnished by one of the ablest of American 
lawyers, under the title, "Extent and Limits of Legis- 
lative Control Over Freedom of Contract." While this 
discussion by Mr. Dye is from the standpoint of one 
who evidently considers the trust movement as a natural 
outgrow T th of economic conditions, and while some of its 
conclusions will be sharply questioned, it is candid, clear 
and exhaustive. 

In the article,- "Remedies," under the sub-title, 
"Remedy by Trust Disintegration," will be found some 
views of an interesting nature concerning the disrup- 
tion of the trusts through the steady pressure and the 
judicial application of the prohibitions of the common 
law, reinforced by state statutes, against all organiza- 
tions embodying practical monopolies. Recent judicial 
decisions, notably that of the Glucose case, by the Su- 
preme Court of Illinois, are attracting wide attention, 
and causing much debate as to w T hat further may follow 
along the same general line. The recently recorded at- 
titude of the federal Supreme Court adverse to all 
monopolistic tendencies and aggregations adds interest 
to the situation. 



214 TRUSTS OR COMPETITION? 

TRUSTS UNDER THE FEDERAL CONSTITUTION. 

The Extent and Limits of Legislative Control Over the Freedom of Con- 
tract—The Case Stated— Power of Congress in the Premises— Power 
of State Legislatures— Sacredness of Private Property— Inalienable 
Right of Every Citizen to Do What He Will with His Own— One 
Corporation May Lawfully Purchase the Assets and Business of All 
Others — The Resulting Suppression of Competition No Bar to the 
Transaction— The Modern Monopoly-trust Legally Unassailable. 

[By Mr. John T. Dye, of the Indianapolis Bar.] 

[By far the ablest presentation that has yet been made of 
the propositions of constitutional law upon which the modern 
trust system claims' to repose, and by which it claims to be pro- 
tected against successful assault, has been furnished by Mr. 
John T. Dye, general counsel for the Cleveland, Cincinnati, Chi- 
cago & St. Louis Railway Company. It was embodied in an ad- 
dress delivered by him at the last annual meeting of the Indiana 
State Bar Association (August, 1899), and is given here by his 
special permission and without material abbreviation. The other 
view would be that so far as the courts outside of New Jersey 
have yet reached and passed upon the central question involved 
in the present trust movement (namely, the legal right of one 
corporation deliberately to obtain and then to operate a virtuaL 
monopoly x>f an entire industry within the United States by pur- 
chasing to that end all or nearly all of the previously independ- 
ent plants and businesses constituting that industry), they have 
not sustained Mr. Dye's contention that such a course is vali- 
dated and protected by the guaranty of freedom of contract im- 
pliedly embodied in the federal constitution. What the United 
States Supreme Court may decide remains to be seen, but oppo- 
nents of the trust suggest that the outgiving of that tribunal 
in deciding the Traffic Association and Trans-Missouri cases in- 
dicates that systematic monopoly artificially achieved, as in our 
trust system, will need to find some other legal warrant than 
that which is furnished by freedom of contract. 

After summarizing the remarkable industrial development 
in the United States, especially during the last two decades, and 



TRUSTS AND THE FEDERAL CONSTITUTION. 215 

stating that in the opinion of many "unrestrained competition 
in some industries has become so fierce and destructive as to 
be ruinous, and combination under such conditions is absolutely 
indispensable to the public welfare," Mr. Dye refers to the 
present phenomenal tendency toward industrial consolidation 
and then takes up the special theme of his address— "The extent 
and limits of legislative control over the freedom of contract;" 
in other words, the question of the power of Congress and the 
State Legislature over the modern Trust.— The Editor.] 



When the people are disturbed by any change in economic 
and social conditions from which they apprehend real or 
imaginary evils, the first impulse is to repress the movement 
by legislation. But, as economic and social laws are sometimes 
stronger than legislative enactments, these attempts have not 
always been successful. Such legislation often produces results 
entirely different from those intended and sometimes accelerates 
the very movement it is designed to repress. 

The Question Stated.— Whether this movement be for good 
or evil is an economic and social question, and not a legal one; 
and economic questions have a way of working out their own 
solution. It is clear, however, that there is no way to arrest 
this movement except by the legislative control of the freedom 
of contract in the use and disposition of property, in such man- 
ner as to prevent the employment of vast amounts of capital in 
one class of business under unity of control and management; 
and we are confronted with the legal question, How far is this 
possible under our system of government? 

The legal question would be comparatively simple in a 
government where the sovereignty was vested in one body, or 
head, but it is more complicated under our system of govern- 
ment, where sovereignty rests in the people, and they have 
divided up and parceled out its exercise between the federal 
government and the forty-five states, and between the executive, 
legislative and judicial departments, and have incorporated in 
the organic law all the checks that could be devised upon 
the exercise of sovereign power, to protect and preserve the 
historic rights which the English race has acquired in its long 
contest for freedom. The great contribution of English speak- 
ing people to civilization has been in developing and establish- 
ing institutions wnich enlarge, protect and defend the area of 
individual freedom, the right to liberty, property and the pursuit 



216 TRUSTS OR COMPETITION? 

of happiness. And this has been accomplished by limiting the 
functions of the state, conferring the exercise of different por- 
tions of governmental authority upon separate agencies, and 
restraining the action of these agencies by the various checks 
and devices which have been discovered in the painful struggle 
of five centuries. 

"It is the felicity of the American people," says Professor 
Hare, "that, while they are sovereign, they have given bonds 
not to exercise their power despotically, and cannot, even on 
the pretense of necessity, or of the greatest good of the greatest 
number, disregard the rights of individuals." Hare's American 
Constitutional Law, p. 1243. 

The constitution confers on Congress exclusive power within 
a carefully defined sphere, in which the states have no juris- 
diction. 

As to powers not granted to the national government, each 
of the states is supreme in its own territory, but has no juris- 
diction beyond its boundaries. No state can exercise any con- 
trol outside of its own territory over the acts or contracts of in- 
dividuals or corporations residents of other states. The citizens 
of each state are also citizens of the United States, and entitled 
to the privileges and immunities of citizens in the several states. 

The exercise of governmental power is further divided be- 
tween legislative, judicial and executive departments, and the 
action of each department is confined to its own sphere. Legis- 
lation can be exercised only within the sphere of "legislative 
power," and is also subject to the limitations contained in the 
constitution to protect the historic rights which are declared 
inalienable by the declaration of independence. 

So that a legislative enactment to be law must be (1) within 
the sphere of "legislative power," (2) it must be within the 
jurisdiction of the legislative body enacting the statute, and (3) . 
it must not violate the organic law ordained in the constitution. 

I. 

THE POWER OF CONGRESS OVER THE FREEDOM OF CONTRACT. 

Congress has only such powers as are expressly granted to 
it by the constitution, and as are necessary and proper to carry 
out such express powers. Among these are the power to enact 
a bankruptcy law; the power to coin money and regulate the 
value thereof, and the power to regulate commerce among the 
states and with foreign nations. 

Under the power to pass a bankruptcy law, and under the 
power to coin money and regulate the value thereof, Congress 



POWERS OF CONGRESS. 217 

may destroy the obligations of contracts. Where a contract has 
been made payable in dollars, Congress may change the value 
of the dollar and the contract will be payable in legal dollars 
at the time of its enforcement. Congress may also make paper 
money, issued by the government, legal tender. But where the 
contract is made payable in commodities, or in so many ounces 
of gold or silver, Congress cannot alter the contract by requir- 
ing it to be paid in a different commodity or a less amount 
of bullion than that stipulated. 

It is not in the power of Congress to prevent parties from 
making contracts payable in bullion or commodities, nor in the 
power of the states. The states are forbidden by the constitu- 
tion to impair the obligation of contracts, but no such restraint 
is imposed on the United States; its inability arises solely from 
want of power, and ceases to exist when a contract stands in 
the way or falls within the scope of any of the powers con- 
ferred expressly or impliedly by the constitution. Hare's Ameri- 
can Constitutional Law, 1239, Trebilcock v. Wilson, 12 Wall. 
687; Bronson v. Rhodes, 7 Wall. 229. 

The Commerce Clause of the Constitution.— The power to 
regulate commerce with foreign nations, among the several 
states and with the Indian tribes, is committed by the constitu- 
tion to Congress. 

In this vast field its power is supreme and exclusive; it 
may make such regulations as its judgment dictates, subject only 
to the limitations imposed in the constitution. It can impose no 
tax or duty upon articles exported from any state. It can give 
no preference, by any regulation of commerce, to ports of one 
state over those of another. No person can be deprived of 
liberty or property without due process of law, nor shall private 
property be taken for public use without just compensation. 

Over contracts coming within the sphere of foreign and 
interstate commerce, the' states have no jurisdiction, except in 
the exercise of the taxing power, the police power and the 
power of eminent domain, all of which are subject to the 
limitations of the federal constitution. 

Commerce Among the Several States.— While the confusion 
and friction wrought by conflicting legislation of jealous states 
was one of the strongest incentives to the formation of the 
Federal Union; it is worthy of note that until 1887 there was 
no general act to regulate interstate commerce. We had a 
whole century of splendid achievement, unparalleled in the 
history of the world. Our railroad system had been completed 
and operated by private enterprise, practically without restraint 



218 TRUSTS OR COMPETITION? 

or regulation by Congress, including the continental roads, to 
build which Congress largely contributed the money. 

Sir Henry Maine, in his Essay on Popular Government, page 
51, declares that "all this beneficent prosperity reposes on the 
sacredness of contract and the stability of private property; 
the first the implement, and the last the reward, of success in the 
universal competition." 

And the act to regulate commerce, passed in 1887, in the 
language of Jackson, J., in I. C. C. v. B. & O. R. R. Co., 43 
Fed., 37, which has been three times cited with approval by 
the Supreme Court, "leaves common carriers as they were at 
common law, free to make special contracts looking to the in- 
crease of their business, to classify their traffic, to adjust and 
apportion their rates so as to meet the necessities of commerce, 
and generally to manage their important interests upon the 
same principles which are regarded as sound and adopted in 
other trades and pursuits" * * * "subject to the two leading 
prohibitions that their charges shall not be unjust or unrea- 
sonable, and that they shall not unjustly discriminate so as 
to give undue preference or advantage, or subject to undue 
preference or disadvantage persons or traffic similarly circum- 
stanced." 

While Congress has power to fix rates or charges for inter- 
state transportation, there was no attempt to do so in the act 
to regulate commerce, and if such regulation should be attempted 
in the future, the limitation of the fifth amendment would apply 
to the"action of Congress the same rule whic'h has been applied 
under the fourteenth amendment to the action of the states, and 
would prohibit the establishment of rates for the interstate 
transportation of persons or property that would not admit of 
the carrier earning such compensation as should, under all the 
circumstances, be just to it and to the public, without some 
proceeding by due process of law to determine as to the reason- 
ableness of such rates. Smith v. Ames, 18 Sup. Ct. Reporter, 
426. 

Limits of Powers of Congress.— Congress has unquestioned 
power to prevent contracts, combinations or conspiracies to 
restrain trade that come within the sphere of its jurisdiction 
to regulate interstate or foreign commerce, but outside of this 
field it has no such power. 

The rule upon this question is very clearly stated in re 
Greene, 52 Fed. Rep., 113 (1892), in a lucid opinion construing 
the anti-trust law of July 2, 1890. 

"Congress may place restrictions and limitations upon the right 
of corporations created and organized under its authority to acquire, 



WHAT IS INTER-STATE COMMERCE? 219 

use and dispose of property. It may also impose such restrictions 
and limitations upon the citizen in respect to the exercise of a public 
privilege or franchise conferred by the United States. But Congress 
certainly has not the power or authority under the commerce clause, 
or any other provision of the constitution, to limit and restrict the 
right of corporations created by the states, or the citizens of the 
state, in the acquisition, control and disposition of property. Neither 
can Congress regulate or prescribe the price or prices at which such 
property or the products thereof shall be sold by the owner or owners, 
whether corporations or individuals. It is equally clear that congress 
has no jurisdiction over, and can not make criminal the aims, pur- 
poses and intentions of persons in the acquisition and control of 
property, which the states of their residence or creation sanction and 
permit. It is not material that such property, or the products thereof, 
may become the subject of trade or commerce among the several 
states or with foreign nations. Commerce among the states within 
the exclusive regulating power of Congress 'consists of intercourse 
and traffic between their citizens, and includes the transportation of 
persons and property as well as the purchase, sale and exchange of 
commodities.' County of Mobile vs. Kimball, 102 U. S. 691-702; 
Gloucester Ferry Co. vs. Pennsylvania, 114 U. S. 203, 5 Sup. Ct. 
Rep. 826. 

''In the application of this comprehensive definition, it is settled 
by the decisions of the Supreme Court that such commerce includes, 
not only the actual transportation of commodities and persons be- 
tween the states, but also the instrumentalities and processes of such 
transportation. That it includes all the negotiations and 'contracts 
which have for their object, or involve as an element thereof, such 
transmission or passage from one state to another. That such com- 
merce begins, and the regulating power of Congress attaches, when 
the commodity or thing traded in commences its transportation from 
the state of its production or situs to some other state or foreign 
country, and terminates when the transportation is completed, and 
the property has become a part of the general mass of the property 
in the state of its destination. When the commerce begins is deter- 
mined not by the character of the commodity, nor by the intention of 
the owner to transfer it to another state for sale, nor by his prepara- 
tion of it for transportation, but by its actual delivery to a common 
carrier for transportation, or the actual commencement of its trans- 
fer to another state. At that time the power and regulating authority 
of the states cease, and that of Congress attaches and continues, 
until it has reached another state, and become mingled with the 
general mass of property in the latter state. 

"That neither the production nor manufacture of articles or com- 
modities which constitute subjects of commerce, and which are in- 
tended for trade and traffic with citizens of other states, nor the 
preparation for their transportation froiu the state where produced 
or manufactured, prior to the commencement of the actual transfer, 
or transmission thereof to another state, constitutes that interstate 
commerce which comes within the regulating power of Congress; and, 
further, that after the termination of the transportation of commodi- 
ties or articles of traffic from one state to another, and the mingling 



220 TRUSTS OR COMPETITION? 

or merging thereof in the general mass of property in the state of 
destination, the sale, distribution and consumption thereof in the 
latter state forms no part of interstate commerce. Pensacola Tel. 
Co. vs. Western Union Tel. Co., 96 U. S. 1; Brown vs. Huston, 114 
U. S. 622, 5 Sup. Ct. Rep. 1091; Coe vs. Errol, 116 U. S. 517-520, 
6 Sup. Ct. Rep, 475; Robbing vs. Taxing Dist,, 120 U. S. 497, 7 Sup. 
Ct. Rep. 592; Kidd vs. Pearson, 128 U. S. 1, 9 Sup. Ct. Rep. 6. In 
the latter case the Supreme Court pointed out the distinction between 
commerce and the subjects thereof, and held that the manufacture of 
distilled spirits, even though they were intended for export to other 
states, was not commerce, falling within the regulating powers of 
Congress." 

The Knight Case.— This same rule was followed in United 
States vs. E. C. Knight Co., 60 Fed. Rep. 934 [the Sugar Trust 
case] and the case was afterward affirmed by the supreme 
court of the United States in 156 U. S. 1. In this case tbe 
Supreme Court decided that the act to protect trade and com- 
merce against unlawful restraint and monopolies, July 2, 1890 
[federal anti-trust act], applied to monopolies in restraint of 
interstate and international trade or commerce, and not to 
monopolies in the manufacture even of a necessary of life; 
that the intent to export a manufactured article to foreign 
nations or to send it to another state did not determine the 
time when the article or product passed from the control of 
the state and belonged to commerce; and that, accordingly, the 
act did not apply to a company engaged in one state in the re- 
fining of sugar under the circumstances detailed in that case, 
because the refining of sugar under those circumstances bore no 
distinct relation to commerce between the states or with foreign 
nations. In an opinion in which eight members of the court 
concurred, the Supreme Court [Chief Justice Fuller] said: 

"The argument is that the power to control the manufacture of 
refined sugar is a monopoly over a necessary of life, to the enjoyment 
of which by a large population of the United States interstate com- 
merce is indispensable, and that, therefore, the general government 
in the exercise of the power to regulate commerce may repress 
such monopoly directly and set aside the instruments which have 
created it. But this argument cannot be confined to necessaries of 
life merely, and must include all articles of general consumption. 
Doubtless the power to control the manufacture of a given thing in- 
volves in a certain sense the control of its disposition, but this is a 
secondary and not a primary sense; and although the exercise of 
that power may result in bringing the operation of commerce into 
play, it does not control it, and affects it only incidentally and 
indirectly. Commerce succeeds to manufacture, and is not a part of 
it. The power to regulate commerce is the power to prescribe the 
rule by which commerce shall be governed, and is a power inde- 
pendent of the power to suppress monopoly. But it may operate 



CERTAIN PROPOSITIONS SETTLED. 221 

in repression of monopoly whenever that comes within the rules 
by which commerce is governed or whenever the transaction is 
itself a monopoly of commerce. 

"It is vital that the independence of the commercial power and of 
the police power, and the delimitation between them, however some- 
times perplexing, should always be recognized and observed, for 
while the one furnishes the strongest bond of union, the other is es- 
sential to the preservation of the autonomy of the states as required 
by our dual form of government; and acknowledged evils, however, 
grave and urgent they may appear to be, had better be borne than 
the risk be run, in the effort to suppress them, of more serious con- 
sequences by resort to expedients of even doubtful constitutionality. 

"It will be perceived how far reaching the proposition is that the 
power of dealing with a monopoly directly may be exercised by the 
general government whenever interstate or international commerce 
may be ultimately affected. The regulation of commerce applies to 
the subjects of commerce and not to matters of internal police. Con- 
tracts to buy, sell, or exchange goods to be transported among the 
several states, the transportation and its instrumentalities, and 
articles bought, sold, or exchanged for the purpose of such transit 
among the states, or put in the way of transit, may be regulated, 
but this is because they form part of interstate trade or commerce. 
The fact that an article is manufactured for export to another state 
does not of itself make it an article of interstate commerce, and the 
intent of the manufacturer does not determine the time when the 
article or product passes from the control of the state and belongs 
to commerce." 

These propositions seem to be settled: 1. The power of 
Congress does not extend to preventing contracts and combina- 
tions in restraint of trade and monopolies outside of the sphere 
of commerce among the states and with foreign nations. 

2. The business of manufacturing is not embraced in inter- 
state commerce, and Congress has no power to control or re- 
strain aggregations of capital in the business of manufacturing. 

3. Congress has no power to restrain monopoly as such, un- 
less it comes within the rules by wmich commerce is governed, 
or be itself a monopoly of commerce. 

4. Congress cannot limit the rights of persons or corpora- 
tions in the mere acquisition, control or disposition of property, 
or regulate the price at which such property should be sold, or 
make criminal acts of persons or corporations in the acquisition, 
and control of property w^hich the states of their residence or 
creation sanction or permit. 

5. When commerce begins is determined not by the charac- 
ter of the commodity nor the intention of the owner to transfer 
it to another state for sale, nor by his preparation of it for trans- 
portation, but by its actual delivery to a common carrier for 
transportation or by the actual commencement of its transfer 



222 TRUSTS OR COMPETITION? 

to another state. At that time the power to regulate of the 
state ceases and that of Congress attaches and continues until 
it has reached another state and becomes mingled with the 
general mass of property in the latter state. 

6. Contracts to buy and sell or exchange goods to be trans- 
ported among the several states, the transportation and' its in- 
strumentalities, and articles bought, sold or exchanged in the 
business of such transit among the states and in the 'way of 
transfer, may be regulated, because they form a part of inter- 
state trade or commerce. 

7. The fact that an article is manufactured for export in 
another state does not of itself make it an article of interstate 
commerce. The intent of the manufacturer does not determine 
when the article or product passes from the control of the 
state and belongs to commerce. 

8. The case of the Addystone Pipe Company decided that an 
agreement or combination between corporations engaged in 
private employment which is not "a contract to buy, sell or ex- 
change goods to> be transported among the several states," but 
which is intended to and necessarily does operate as a restraint 
upon competition in the sale of goods in one state to be de- 
livered from another, is interstate commerce, or an obstruction 
to such commerce, subject to regulation by Congress. 

If the Supreme Court affirms this decision, it does not clearly 
appear that it would have any effect upon (1) the aggregation of 
capital in one kind of business by persons or corporations en- 
gaged in private employments, nor (2) upon the restraint of 
competition necessarily resulting therefrom, where there was no 
agreement or combination. Congress cannot limit the amount 
of money invested in one kind of business. Persons or corpora- 
tions would still have power to buy, sell and exchange goods to 
be transported among the several states. They could not be 
compelled, to sell their products in any particular territory or to 
any particular person or at fixed prices. 

Line Between State and Federal Power.— It is manifest that 
if the line between the power to regulate commerce, which be- 
longs to Congress, and the police power, which belongs to the 
states, should be erased or made indefinite great confusion 
would result. 

If under the power to regulate commerce— "to prescribe the 
rule by which commerce shall be governed"— Congress had ex- 
clusive jurisdiction to prescribe the rules by which all persons 
should be governed in making contracts which may affect com 
merce, the sphere of local self-government would be very much 
narrowed, and the power of the national government indefinitely 
extended. 



POWERS OF THE STATE. 223 

It should be noted that in the Joint Traffic Association case, 
in the majority opinion it is said (Supreme Court Reporter, vol. 
19, No. 3, page 35): "It is not only possible, but probable, that 
good sense and integrity of purpose would prevail among the 
managers [of railroads], and, while making no agreement and 
entering into no combination by which the whole railroad inter- 
est as herein represented should act as one combined and con- 
solidated body, the managers of each road might yet make such 
reasonable charges for the business done by it as the facts 
might justify. " 

If the managers of railroads, engaged in interstate commerce, 
in a public employment, and subject to regulation by Congress, 
each acting for his own road and not in pursuance of any con- 
tract or combination, may make such reasonable charges for 
business done as the facts may justify, no reason is apparent 
why persons or corporations engaged in private employments, 
and not subject to regulation by Congress, might not accom- 
plish the same purpose, without any combination or contract in 
restraint of trade. 

It appears to be well settled that the power of Congress does 
not extend to preventing contracts or combinations in restraint 
of trade, or monopolies outside the sphere of commerce among 
the states and with foreign nations, although it may be difficult 
sometimes to draw the line between interstate commerce and 
the internal police power of the state. 

Outside of the domain of interstate commerce and of the 
exercise of the power to coin money and regulate the vajne 
thereof, and of the power to pass a bankruptcy law, Congress 
has no power to control the making of contracts, nor to affect 
them, except in so far as they may be affected by the exercise 
of governmental powers, such as to declare war or make treaties, 
or lay taxes, or in the exercise of the power of eminent domain. 

II. 

THE POWER OP THE STATE TO LIMIT THE FREEDOM OP 

CONTRACT. 

Outside of the domain committed by the constitution to the 
federal government, the sovereignty of the state is supreme, 
subject, of course, to the limitations imposed in the constitution 
of the United States. 

But the legislature cannot exercise despotic, uncontrolled and 
arbitrary power. It can only exercise "legislative power." 

Under our form of government the legislature is not su- 



224 TRUSTS OR COMPETITION? 

preme; it is only one of the organs of that absolute sovereignty 
which resides in the whole body of the people. Like other de- 
partments of the government, it can only exercise such powers 
as have been delegated to it, and when it steps beyond that 
boundary, its acts, like those of the rqost humble magistrate in 
the state who transcends his jurisdiction, are utterly void. 

Eminent Authorities Quoted.— "Mr. Justice Story says (Wilk- 
inson vs. Leland, 2 Peters 627): 'The fundamental maxims of 
a free government seem to require that the rights of personal 
liberty and private property should be held sacred. At least no 
court of justice in this country would be warranted in assuming 
that the power to violate and disregard them— a power so re- 
pugnant to the common principles of justice and civil liberty- 
lurked under any general grant of legislative authority, or ought 
to be implied from any general expression of the will of the 
people. The people ought not to be presumed to part with 
rights so vital to their security and well being, without very 
strong and direct expressions of such an intention.' 'See also 2 
Kent Com., 13,340, and cases there cited.) 

The security of life, liberty and property lies at the founda- 
tion of the social compact; and to say that this grant of legisla- 
tive power includes the right to attack private property is equiv- 
alent to saying that the people have delegated to their servants 
the power of defeating one of the great ends for which the 
government was established." (Taylor vs. PorteV, 4 Hill MI- 
MS.) 

No state shall deprive any person of life, liberty or property 
without due process of law, nor deny to any person equal pro- 
tection of the laws. 

It is a striking illustration of the manner in which the Eng- 
lish-speaking people preserve the historic continuity of their de-^ 
velopment, that we find the language of the first great charter 
of English liberty, centuries afterward, incorporated in the fifth 
amendment of the constitution of the United States, limiting 
the power of the federal government, and three-quarters of a 
century later, in the fourteenth amendment, limiting the power 
of the states, and expanded and widened to embrace equal pro- 
tection of the law to all persons. 

The fact that no cause has arisen under the fifth amendment, 
limiting the action of the federal government, which required a 
construction or definition of the' word "liberty," is a striking il- 
lustration of how lightly the federal government has borne upon 
the citizen. But the same language contained in the fourteenth 
amendment has been construed, and will doubtless be the sub- 
ject of many future adjudications. 



FREEDOM OF CONTRACT DEFINED. 225 

The word "liberty" embraces the right to pursue any liveli- 
hood or lawful avocation, and for that purpose to enter into all 
contracts which may be proper and necessary and essential to 
carrying them out to a successful conclusion, including the 
right of acquiring, holding and selling property, and the right to 
make all proper contracts in relation thereto. Allgeyer vs. State 
of Louisiana, 165 U. S. 580; L. C. P. Co., Book 41, p. 832; 
Butchers' Union, S. H. & L. S. L. Co. vs. Crescent Citv L. S. L. 
& S. H. Co., Ill U. S. 746-762 (28, 585-589); Powell vs. Pennsyl- 
vania, 127 II. S. 678-684 (32, 235-256.) 

In the words of an eminent jurist, Mr. Phelps, "A just free- 
dom of contract in lawful business is one of the most im- 
portant rights reserved to the citizen under the general term of 
'liberty,' for all human industry depends upon such freedom for 
its fair reward. 

"The use of property is an essential part of it, and when 
abridged, the property itself is taken. Its use is abridged when 
the owner is precluded from any contract that is necessary or 
desirable in order to secure to him a just compensation for its 
employment. And when any class in the community is so pre- 
cluded, it is, to that extent, deprived of the equal protection of 
the law.' " 

The police power is subject to the limitations imposed by 
the constitution of the United States. 

The state may unquestionably, in the exercise of its powers 
of sovereignty, regulate and control the acts and contracts of its 
citizens, but all legislative acts must be within the scope of 
"legislative power," and they must be subject to the paramount 
power of the constitution of the United States, and may not 
violate the rights secured by that instrument. 

The question whether in any particular case legislation over- 
steps the limitations prescribed by the federal constitution must 
be decided by the judicial tribunal, and not by the legislature. 

"The courts are not bound by mere form, nor are they to be 
misled by mere pretenses. They are at liberty, and indeed are 
under a solemn duty, to look at the substance of things when- 
ever they enter upon the inquiry whether a legislature has trans- 
cended the limits of its authority. If, therefore, a statute pur- 
porting to have been enacted to protect the public health, the 
public morals or the public safety has no real or substantial 
relation to those objects, or is a palpable invasion of rights se- 
cured by the fundamental law, it is the duty of the courts to so 
adjudge, and thereby give effect to the constitution." Hugler 
vs. Kansas, 123 U. S. 661. 

In the case of L. S. & M. S. Ry. Co. vs. Smith, 19 Sup. Ct. 

15 



226 TRUSTS OR COMPETITION? 

Rep. No. 26, p. 567, it was said: "This (police) power roust, 
however, be exercised in subordination to the provisions of the 
federal constitution. If, in the assumed exercise of its police 
power, the legislature of a state directly and plainly violates a 
provision of the constitution of the United States, such legislation 
would be void. 

Where "the state legislature has the power of regu- 
lation over the corporations created by it, and in cases 
of railroad corporations, the same power of regulation 
and also full control over the subject of rates to be 
charged by them as carriers for the transportation of per- 
sons and property [within the boundaries of the par- 
ticular state], assuming that the state is not controlled by con- 
tract between itself and the railroad company, trfe question is, 
how far does the authority of the legislature extend in a case 
where it has the power of regulation, and also* the right to 
amend, alter, or repeal the charter of a company, together with 
a general power to legislate upon the subject of rates and charges 
of all carriers? It has no right, even under such circumstances, 
to take away or destroy the property, or annul the contracts of a 
railroad company with third persons. 

"A railroad company, although a quasi-public corporation, 
and although it operates a public highway, has, nevertheless, 
rights which the legislature cannot take away, without a viola- 
tion of the federal constitution. As stated in Smythe vs. Ames, 
169 U. S. 466, 544, 18 Sup. Ct. 418, a corporation is a person 
within the protection of the fourteenth amendment. Although it 
is under governmental control, that control must be exercised 
with due regard to constitutional guarantees for the protection 
of its property." 

As to Regulation of Rates in Public Employments.— The 
state can regulate and control corporations or individuals en- 
gaged in public employments, such as common carriers, grain 
elevators, etc., and can require that their services in such public 
employments shall be performed for reasonable compensation. 
Munn vs. People of Illinois, 4 Otto, 113. 

But it cannot deprive such persons or corporations so en- 
gaged in public employments of such reasonable compensation 
as may be just to them and to the public, under all the circum- 
stances, without due process of law. Smith vs. Ames, supra. 

As to Private Employments.— The state has no power to 
compel any corporation or individual engaged in private em- 
ployment to sell its property or services at a fixed price, nor can 
it prevent any purchaser from buying property or services at 
such price as may be agreed on. 



LIMITS OF LEGISLATIVE CONTROL. 227 

As to Domestic Corporations.— The state has power to limit 
and regulate the scope and operation of all corporations which 
it may create, and impose upon them such conditions as are 
wise and just. 

But the state cannot impair the obligation of contracts, and 
a charter granted to a corporation is a contract [between the 
chartering state and the chartered corporation] and cannot be 
revoked unless the power of revocation is reserved in the 
grant. 

Neither can it prevent the aggregation of capital by an ex- 
isting domestic corporation acting within the scope and within 
the limits of its corporate authority, where the power of re- 
vocation of its charter was not reserved in the grant. 

As to Foreign Corporations.— The state can prevent cor- 
porations formed in other states [or countries] from coining into 
or carrying on business within its jurisdiction, or it may let 
them come into its jurisdiction under such conditions, as to the 
legislature may seem wise and just. 

As to what constitutes coming into and carrying on business 
within a state, by a foreign corporation, there is sharp con- 
troversy. 

It is perfectly clear, however, that selling property by such 
foreign corporation in another state, to a citizen of this state, 
is not coming into or doing business within this state. A citizen 
of Indiana may buy agricultural implements of a foreign cor- 
poration in Illinois or sugar or oil of a foreign corporation in 
New York, and the corporation selling to such citizen in its own 
state cannot be held to be doing business in the state of Indiana* 

As to Trusts, Combinations and Conspiracies in Restraint 
of Trade or Competition.— The state has unquestioned power, 
within its boundaries, to make void all contracts, combinations 
or conspiracies in restraint of trade or commerce, and to im- 
pose penalties upon parties making such contracts and entering 
into such combinations. 

But where there is no combination, conspiracy or agreement 
to restrain trade or commerce, it cannot deprive any person of 
his liberty or property by restraining him from pursuing a law- 
ful avocation, or from making such contracts in the acquisition, 
use, and disposition of his property as may be necessary to 
successfully carry on any such pursuit. 

The mere fact that large aggregations of capital in one kind 
of business inevitably tend to prevent competition does not 
authorize the state to prevent them, where there is no contract 
or combination to restrain trade. It cannot limit the amount 
of capital that persons engaged in private employments shall 



228 TRUSTS OR COMPETITION t 

employ in their business, nor the amount of products they shall 
ouy or sell, nor prescribe what prices they shall pay or receive, 
nor the persons to whom they shall sell. It cannot prevent 
them from buying from foreign corporations in other states, 
nor can it in any way control or regulate the business of such 
corporations in other states. 

Nor, as we have stated, can it prevent or control the action of 
domestic corporations acting within the scope and limits of 
their corporate authority in extending their business, and in- 
creasing their capital, unless by revoking their charters, and this 
cannot be done where such power of revocation is not reserved 
in the grant Nor can it prevent the purchaser of property in 
another state from a corporation organized under the laws of 
another state from importing such property into the state of his 
residence, nor from selling such property to other citizens of 
the state of his residence, except such as may be harmful or 
dangerous, and the sale of which may therefore be restrained 
under the police power. And the exercise of such restraint under 
the police power upon the sale of products endangering the 
safety of the public must be by a general law which deprives no 
person or corporation of the equal protection of the laws. 

Various Forms of Trusts and Combinations.— Mr. Thompson, 
in his Commentaries on the Law of Corporations (Section 6400), 
divides the various schemes under which these combinations 
have been made into five classes, and says that "they are all 
illegal except the last two." (Sec. 6401.) 

"1. In so far as they consist of conspiracies to engross the 
necessaries of life, they are illegal and criminal, under the prin- 
ciples of the common law. 

"2. They are illegal as contracts in general restraint of 
trade. 

"3. They are unlawful in the sense of being ultra vires, 
that is to say, in the sense of being beyond the powers of each 
and every corporation entering into them. 

"In the case of corporations formed to render service to the 
public distributively, such as railroad companies, gas light com- 
panies, etc., they are unlawful, in so far as they involve at- 
tempts on the part of the corporations entering into them 
to abnegate their public duties and devolve them upon other 
persons or corporations." 

The fourth and fifth classes, which are, by inference, ad- 
mitted to be lawful, are as follows: 

A fourth is an agreement under which the competing cor- 
porations, without entering into an arrangement in the nature 
of a partnership, or establishing a central board o 4 f control, agree 



LAW OF THE CORPORATE TRUST. 229 

among themselves that each is to take a certain course of action, 
the result of which will be to diminish or prevent competition 
among them, and to maintain certain prices for the commodity 
which they manufacture and sell. 

The Modern •Trust."— "5. A fifth is a voluntary dissolution 
of all the competing corporations, and the formation of a single 
corporation under the statutes of some state whose laws are 
sufficiently liberal to enable it to be done— the new corporation 
becoming the purchaser of all the properties of the antecedent 
corporations, and the shareholders of such corporations receiv- 
ing shares in the new corporation upon a basis agreed upon in 
the scheme of re-incorporation." 

No reason has ever been suggested why corporations en- 
gaged in the same kind of business, without entering into a con- 
tract, or conspiracy or combination to restrain trade, may not 
each for itself take a certain course of action, the result of 
which would be to diminish or prevent competition or tend to 
maintain reasonable prices for the services they render or for 
the commodities which they manufacture and sell. 

Indeed, this method is suggested in the case of railroad com- 
panies, in the language heretofore quoted from the opinion of 
the Supreme Court in the Joint Traffic Association case, and 
such course is characterized, in the opinion of the court, as that 
of good sense and integrity of purpose. 

In the case of Post vs. Southern Railway et al., decided by 
the Supreme Court of Tennessee at its April term, it was held 
that this method was not obnoxious to the state and federal 
statutes against trusts and combinations. 

It is also difficult to see how a single corporation, formed 
under the statute of some state, whose laws allow one corpora- 
tion to become the purchaser of the property or stock of other 
corporations, may not indefinitely extend its control over a 
certain kind of industry. This fifth method, which is now being 
usually adopted, it would seem, cannot be defeated, so long- 
as there is a state in the Union whose laws, like those of New 
Jersey or Delaware, authorize the formation of such corporations 
with power to become the purchasers of the property of ante- 
cedent corporations. 

In Conclusion.— The state must preserve peace and enforce 
order to protect the liberty of all, and to that end, and to pro- 
vide for the general welfare, it may regulate the acts and con- 
tracts of all persons in its dominion, including combinations of 
capital and of labor within the, limitations imposed by the or- 
ganic law, but no regulations can be made which will destroy 
or impair the historic rights of liberty and property, upon 
which our present social order is based. 



230 TRUSTS OR COMPETITION? 

Our modern industrial system is so vast, so complicated, 
so sensitive, and it affects so deeply the interests of every part 
of the commonwealth in ways that it is impossble to foresee or 
predict, that no man or body of men is wise enough to com- 
prehend it in all its bearings and dictate the course of its future 
development. 

There is no justification of democracy, except the firm faith 
that the full play of social and economic laws, under such regu- 
lation as secures liberty to all, works for the welfare and ad- 
vancement of the race. 



~" THE COMMON LAW. 

ITS ORIGIN AND NATURE. 

The Constitution of the United States assumes the existence of 
thirteen distinct state governments, over whose people its authority 
was to be extended if ratified by conventions chosen for the purpose. 
Each of these states was then exercising the powers of government 
under some form of written constitution, and that instrument would 
remain unaffected by the adoption of the national Constitution, except 
in those particulars in which the two would come in conflict; and as to 
those the latter would modify and control the former. But besides this 
fundamental law, every state has also a body of laws, prescribing 
the rights, duties and obligations of persons within its jurisdiction, 
and establishing those minute rules for the various relations of life 
which cannot be properly incorporated in a constitution, but must 
be left to the regulation of the ordinary law-making power. 

By far the larger and more valuable portion of that body of laws 
consisted of the common law of England, which had been transplanted 
in the American wilderness, and which the colonists, now become an 
independent nation, had found a shelter of protection during all the 
long contest with the mother country, brought at last to so fortunate 
a conclusion. 

The common law of England consisted of those maxims of free- 
dom, order, enterprise, and thrift which had prevailed in the conduct 
of public affairs, the management of private business, the regulation 
of the domestic institutions, and the acquisition, control, and transfer 
of property from time immemorial. It was the outgrowth of the 
habits of thought and action of the people, and was modified gradually 
and insensibly from time to. time as those habits became modified, and 
as civilization advanced, and new inventions introduced new wants 
and conveniences, and new modes of business. Springing from the 
very nature of the people themselves, and developed in their own ex- 
perience, it was obviously the body of laws best adapted to their needs, 
and as they took with them their nature, so also they would take with 



MOGUL STEAMSHIP CASE. 231 

them these laws whenever they should transfer their domicile from 
one country to another. 

For several hundred years, 'however, changes had from time to 
time been made in the common law by means of statutes. Originally 
the purpose of general statutes was mainly to declare and reaffirm 
such common law principles as, by reason of usurpations and abuses, 
had come to be of doubtful force, and which, therefore, needed to be 
authoritatively announced, that king and subject alike might under- 
stand and observe them. 

From the first the colonists in America claimed the benefit and 
protection of the common law. In some particulars, however, the 
common law as then existing in England was not suited to their con- 
dition and circumstances in the new country, and those particulars 
they omitted as it was put in practice by them. They also claimed 
the benefit of such statutes as from time to time had been enacted in 
modification of this body of rules. 

The evidence of the common law consisted in part of the declar- 
atory statutes we have mentioned, in part of the commentaries of 
such men learned in the law as had been accepted as authority, but 
mainly in the decisions of the courts applying tine law to actual con- 
troversies. 

The colonists also had legislatures of their own, by which laws 
had been passed which were in force at the time of the separation, 
and which remained unaffected thereby. When, therefore, they 
emerged from the colonial condition into that of independence, the 
laws which governed them consisted, first, of the common law of 
England, so far as they had tacitly adopted it as suited to their con- 
ditions; second, of the statutes of England, or of Great Britain, 
amendatory of the common law, w'hich they had in % like manner 
adopted; and, third, of the colonial statutes. The first and second 
constituted the American common law, and by this in great part are 
rights adjudged and wrongs redressed in the American States to this 
day.— From Cooley's Constitutional Limitations, p. 32 and following. 



THE MOGUL STEAMSHIP CASE. 

This celebrated case is sometimes cited as permanently 
fixing the attitude of English law as favorable to the utmost 
freedom of combination among competitors, even to the point 
of practically suppressing competition. Briefly, the facts were 
that several independent steamship lines doing business be- 
tween English and Asiatic ports combined and offered to all 
shippers a rebate of five per cent, below the transportation 
rates named by any and all outside or competing lines. The 
*utent and effect was virtually to suppress competition and 



232 TRUSTS OR COMPETITION? 

monopolize the business in the hands of the combination. A 
suit was brought and carried to the highest British court to 
disrupt the combination as involving a contract in undue 
restraint of trade (Mogul Steamship Company vs. McGregor). 
The decision was in favor of the combination. It is contended 
by some trust advocates in this country that American law 
should be made to conform to the English, as interpreted and 
applied in the Mogul Steamship case. Thus far no such ten- 
dency has appeared in the United States. In the Harvard Law 
Review Mr. S. C. T. Dodd, solicitor of the Standard Oil Trust, 
makes the following reference to and quotations from the 
language of the English court in the case cited: 

"If some of the modern opinions of judges in trust cases are to 
be followed, we are relegated at once, by the statutes referred to, 
to the dark ages when business was necessarily carried on in 
defiance of law. For instance, in the Sugar Trust case in tne 
General Term (6 R. & C. L. J. 142), the court, by Judge Daniels, 
reasserted the old doctrines of the common law to their fullest 
extent. The combination was held to be illegal for the reason, 
among others, that 'it was intended to bring about and secure 
ulterior advantages in the way of advanced profits to the as- 
sociates/ Its affairs 'were to be so managed and carried on as to 
promote the profit and gain of the associates' and 'it is no more 
than just to infer that the control is to be used to avoid com- 
petition and enhance prices and in that manner, as it is the 
ordinary expedient to that end, promote the interest and profit 
of the associates.' This is a repetition of the mistake of cen- 
turies ago, that business men may not adopt methods which 
promote their interests and profit, because their desire for profit 
may cause them to use those methods improperly, and because 
their advantage may tend to the disadvantage of others. There 
are four centuries of experience and wisdom between that idea 
and the language of the judges in Mogul Steamship Company vs. 
McGregor, to-wit: That 'the instinct of self -advancement and self- 
protection is the very incentive to trade;' that 'to say that a man 
is to trade fairly, but that he is to stop short at any act which 
is calculated to harm other tradesmen, would be a strange and 
impossible counsel of perfection;' that 'it is perfectly legitimate 
to combine capital for all the mere purposes of trade for which 
capital may, apart from combination, be legitimately used in 
trade;' that 'to limit combination of capital when used for pur- 
poses of competition, would be only another method of attempt- 



FUTURE OF THE TRUST. 233 

ing to set boundaries to the tides;' that 'the object of acquisition 
of gain is lawful and commendable,' and that as 'competition 
exists when two or more persons seek to possess or to enjoy the 
same thing it follows that the success of one must be the failure 
of another.' " 

MR. BEACH AS TO THE FUTURE. 

A leading law writer, Mr. Chas. Fisk Beach, Sr., in his work, 
"A Treatise on Monopolies and Industrial Trusts as Administered 
in England and the United States of America," 1898, says: 

"Prom the foregoing it is apparent that the 'trust,' as a con- 
spiracy or combination for the purpose of creating a monopoly 
in restraint of trade, for the suppression of competition, for the 
limitation of production, or for the increase, or for the maintain- 
ing of prices, or of wages, is in contravention of public policy 
and illegal. Though the courts of this country are not in full ac- 
cord with those of England, and though the decisions of the 
state courts are in a degree divergent, yet on the whole there is 
a good degree of unanimity in holding that the 'trust' is an un- 
lawful organization, and as such void. Moreover, the decisions 
of the courts have been followed by vigorous and positive statu- 
tory enactments. Notwithstanding these facts, however, the 
'trust' continues to live and prosper. Hitherto it has proved to 
be stronger than the legislature and the courts. By means of one 
device or another it has managed to elude the penalties of the 
law. It has been able to escape the forfeiture of its corporate 
privileges and the confiscation of its estates. This is due, how- 
ever, not more to the great strength of these organizations than 
to the indifference and inertia of the public. When the people 
of this country are aroused they are stronger than any individual; 
stronger than any and all business combinations. This is not a 
prophecy in regard to the future of 'trusts,' or a discussion of their 
merits. This work has to do with the law to which these organi- 
zations are subject. It will appear in the progress of the dis- 
cussion that the law is adequate to the control of the 'trust,' as 
well as of the individual, and that the remedy for any and all 
existing evils of this nature, at least, in most of the states, 
is in an unbiased and faithful administration of the law." 



234 TRUSTS OR COMPETITION! 

VIEWS OF THREE PRESIDENTS. 

President Cleveland* Trusts Represent the ' "Coram unism of Pelf"— Presi- 
dent Harrison: They are "Dangerous Conspiracies Against the 
Public Good and Should Be Made the Subject of Prohibitory and 
Even Penal Legislation"— President McKinley: They are "Obnoxious 
to the Common Law and the Public Welfare." 



In his message, delivered to Congress December 5, 1899, President 
McKinley devoted considerable space to the Trust question. By 
quotations from messages of his two immediate predecessors in office 
he showed a striking concurrence of presidential opinion in opposi- 
tion to the trust system. He said: 

Combinations of capital organized into trusts to control the condi- 
tions of trade among our citizens, to stifle competition, limit produc- 
tion and determine the prices of products used and consumed by the 
people, are justly provoking public discussion, and should early claim 
the attention of the Congress. 

The Industrial Commission,, created by the act of the Congress of 
June 18, 1898, has been engaged in extended hearings upon the dis- 
puted questions involved in the subject of combinations in restraint 
of trade and competition. They have not yet completed their in- 
vestigation of this subject, and the conclusions and recommendations 
at which they may arrive are undetermined. 

The subject is one giving rise to many divergent views as to the 
nature and variety or cause and extent of the injuries to the public 
which may result from large combinations concentrating more or 
less numerous enterprises and establishments, whidh. previously to the 
formation of the combination were carried on separately. 

It is universally conceded that combinations which engross or 
control the market of any particular kind of merchandise or com- 
modity necessary to the general community, by suppressing natural 
and ordinary competition, whereby prices are unduly enhanced to the 
general consumer, are obnoxious not only to the common law, but 
also to the public welfare. There must be a remedy for the evils 
involved in such organizations. If the present law can be extended 
mere certainly to control or check these monopolies or trusts, it 
should be done without delay. Whatever power the Congress pos- 
sesses over this most important subject should be promptly ascer- 
tained and asserted. 

PRESIDENT HARRISON. 

President Harrison in his annual message of December 3, 1889, 
says: "Earnest attention should be given by Congress to a considera- 
tion of the question how far the restraint of those combinations of 
capital commonly called 'trusts' is matter of federal jurisdiction. 
When organized, as they often are, to crush out all healthy competi- 



THREE PRE SID EX TS OX THE TRUST. 235 

tion and to monopolize the production or sale of an article of com- 
merce and general necessity they are dangerous conspiracies against 
the public good, and should be made the subject of prohibitory and 
even penal legislation." 

An act to protect trade and commerce against unlaw- 
ful restraints and monopolies was passed by Congress July 
2, 1890. The provisions of this statute are comprehensive 
and stringent. It declares every contract or combination, 
in the form of a trust or otherwise, or conspiracy in restraint of 
trade or commerce among the several states or with foreign nations, 
to be unlawful. It denominates as a criminal every person who 
makes any such contract or engages in any such combination or 
conspiracy, and provides a punishment by fine or imprisonment. It 
invests the several circuit courts of the Lnited States with jurisdic- 
tion to prevent and restrain violations of the act, and makes it the 
duty of the several L nited States district attorneys, under the direc- 
tion of the attorney-general, to institute proceedings in equity to 
prevent and restrain such violations. It further confers upon any 
person who shall be injured in his business or property by any other 
person or corporation, by reason of anything forbidden or declared to 
be unlawful by the act. the power to sue therefor in any Circuit Court 
of the Lnited States without respect to the amount in controversy, 
and to recover threefold the damages by him sustained and the costs 
of the suit, including reasonable attorney fees. It will be perceived 
that the act is aimed at every kind of combination in the nature of a 
trust or monopoly in restraint of interstate or international commerce. 

The prosecution by the Lnited States of offenses under the act 
of 1890 has been frequently resorted to in the Federal Courts, and 
notable efforts in restraint of interstate commerce, such as the 
Trans-Missouri Freight Association and the Joint Traffic Asso- 
ciation, have been successfully opposed and suppressed. 

PRESIDENT CLEVELAND. 

President Cleveland in his annual message of December 7. 
189G — more than six years subsequent to the enactment of this law- 
after stating the evils of these trust combinations, says: 

"Though Congress has attempted to deal with this matter by 
legislation, the laws passed for that purpose thus far have proved 
ineffective, not because of any lack of disposition or attempt to 
enforce them, but simply because the laws themselves as interpreted 
by the courts do not reach the difficulty. If the insufficiencies of ex- 
isting laws can be remedied by further legislation it should be done. 
The fact must be recognized, however, that all federal legislation 
on this subject may fall short of its purpose because of inherent ob- 
stacles and also because of the complex character of our govern- 
mental system, which, while making the federal authority supreme 
within its sphere, has carefully limited that sphere by metes and 
bounds which cannot be transgressed. The decision of our highest 
court on this precise question renders it quite doubtful whether the 
evils of trusts and monopolies can be adequately treated through 
federal action, unless they, seek directly and purposely to include in 



236 TRUSTS OR COMPETITIONS? 

their objects transportation or intercourse between states or between 
the United States and foreign countries. 

"It does not follow, however, that this is the limit of the remedy 
that may be applied. Even though it may be found that federal 
authority is not broad enough to fully reach the case, there can be no 
doubt of the power of the several states to act effectively in the 
premises, and there should be no reason to doubt their willingness to 
judiciously exercise such power." 

FAILURE OF STATE LEGISLATION. 

The state legislation to which President Cleveland looked for 
relief from the evils of trusts has failed to accomplish fully that ob- 
ject. This is probably due to a great extent .to the fact that differ- 
ent states take different views as to the proper way to discriminate 
between evil and injurious combination's and those associations 
which are beneficial and necessary to the business prosperity of the 
country. The great diversity of treatment in different states arising 
from this cause and the intimate relations of all parts of the coun- 
try to each other without regarding state lines in the conduct of 
business have made the enforcement of state laws difficult. 

It is apparent that uniformity of legislation upon this subject 
in the several states is much to be desired. It is to be hoped that 
such uniformity founded in a wise and just discrimination between 
what is injurious and what is useful and necessary in business op- 
erations may be obtained apd that means may be found for the 
Congress within the limitations of its constitutional power so to 
supplement an effective code of state legislation as to make a com- 
plete system of laws throughout the United States adequate to 
compel a general observance of the salutary rules to which I have 
referred. 

The whole question is so important and far-reaching that I am 
sure no part of it will be lightly considered, but every phase of 
it will have the studied deliberation of the Congress, resulting in 
wise and judicious action. 

EFFECT IN WALL STREET. 

The Chicago Tribune of December 7 contained the following 
special dispatch from E. W. Harden, its New York correspondent: 

New York, December 6. — (Special.) — Industrial stocks were sub- 
jected to continuous hammering in to-day's stock market In nearly 
all of the so-called industrial securities there were notable declines, 
this notwithstanding railroad stocks held up well. In the street 
there continues to be a good deal of speculation as to the probable 
course of Congress in the matter of trusts, and the timid have begun 
to run to cover on the belief that stringent legislation will be passed 
directed against all combinations. 

Banks and trust companies are showing less disposition to accept 
industrial securities as collateral for loans. Lenders of money have 
not been favorably disposed toward industrial stocks for some time, 
and of late there has been less of a disposition on their part to put 



TRUSTS MUTUALLY DESTRUCTIVE. 237 

out money on trust stocks. This has had much to do with the recent 
unsettled condition of the stock market, as it relates to industrials. 
There has been a sort of unwritten rule with New York banks and 
trust companies to lend money only on mixed collateral, in which 
industrial securities shall not form more than 25 per cent, in value 
of the whole amount deposited. As the ordinary bank will not loan 
more tfian 80 per cent, of the lace value of collateral deposited it is 
apparent that traders are discouraged from the handling of these 
stocks on margin. 

The President's message, in which he speaks of the necessity for 
appropriate legislation, was the main cause for to-day's weakness. 
Those whose interests lie in the direction of higher prices for these 
stocks contend the President's message should not be looked upon as 
a factor in the situation for the reason that he discriminates in his 
recommendation between the combination formed for the purpose 
of controlling prices and preventing competition and the combinations 
formed on legitimate lines. All of the Trust officials say their com- 
panies belong in the latter list. 



Capt. Judson N. Cross, a leading member of the Minneapolis 
bar, writes: 

My ideas concerning the latest modern trust movement are 
as yet unsettled, crossing and recrossing the line between pro 
and con evety time I give the subject a review T mentally. Of 
one proposition, however, I am certain, and that is that in trade, 
commerce and manufacturing, competition is eternal and will not 
clown. As the force of this law has passed from individuals lo 
the corporation, so it will inevitably be inherited by the trust 
from the corporation. One trust will soon be found competing 
with another. Paraphrasing a certain well-known distich: 

E'en Trusts have other Trusts to bite 'em, 
And so on through, ad infinitum 

Like individuals, trusts will overreach the line of business 
safety, will try to cover too much ground and fall, many of them 
of their own weight. Not all kinds of business have the physical 
and commercial continuity that characterizes the railroad, for 
example, and therefore cannot serve the public interests by con- 
solidations as railroads do. 



CHAPTER IX. 
TRUST MISCELLANY. 

The Trust in Politics— The Tariff and Trusts— The Department Store- 
Trusts and Organized Labor— The Flour-Milling Industry— A Voice 
From New England— The St. Louis Anti-Trust Conference of Gov- 
ernors—Views of Governors Sayers and Roosevelt— The Populist 
Position— Bank Sentiment— Chapter of Possible History (A. D. 1925). 



THE TRUST IN POLITICS. 

Up to the close of the year 1899 the trust question has not be- 
come in any proper sense an issue between political parties, al- 
though it is very much in politics. The sentiment of the people 
in regard to the trust movement is not perceptibly influenced by 
party lines. That sentiment, particularly outside of the great 
cities, but not even excepting them, is so nearly unanimous in 
opposition to what the people understand to be the aims and 
Results of the trust system that no political party could stand 
for a moment against it, and no party shows a disposition to 
hazard the attempt. The problem is so new, at least in magni- 
tude, that there has not been time or occasion for national parry 
conventions to give much attention to it, but with few exceptions 
state conventions of all parties in all sections of the Union 
held since 1897, when the real trust deluge began, have spoken 
with one voice against the trusts or against their attendant vils. 
There has naturally been a wide variety in the form and in- 
tensity of these platform utterances, but no diversity in "their 
general direction. It was to be expected that the party out of 
power would endeavor to fix some degree of responsibility for 
the unpopular trust movement on the party in power, and this 
attempt has been made. It has usually taken the form of charg- 
ing that the Republican protective tariff favors and invites the 
formation of monopoly-trusts by preventing or hampering foreign 

238 



THE TRUST IN POLITICS. 239 

competition. This is either not admitted by Republicans or an 
answer is given like that of Senator Foraker of Ohio, to the 
effect that even if the charge were well-grounded it would still 
be better to have some trusts among us with the universal pros- 
perity which a protective tariff brings, than to destroy that pros- 
perity and bring back the former universal hard times by adopt- 
ing low tariff legislation in order to demolish the trusts. This 
latter policy is likened by Republicans to the farmer's expedient 
of burning the barn and contents in order to get rid of the nits; 
and it is added that, as there are other methods for disposing of 
rats, besides burning valuable barns, so there are other methods 
of abolishing or rendering harmless the undesirable trusts be- 
sides bringing in free trade and thus pulling down the fabric of 
public prosperity. So far as any party issue can grow up out of 
the trust movement it is likely to be this subordinate or collateral 
one of the tariff. 

As to the political standing of the men who have boon 
most conspicuous in forwarding the trust movement, there is 
little chance for gaining partisan advantage. The late ex-Gov- 
ernor Roswell P. Flower of New York was, until his sudden 
death in 1899, the undoubted and acknowledged leader in the 
business of promoting, financing and defending great industrial 
trusts, but his prominence as a national Democratic leader has 
not led anyone to suggest a Democratic alliance with the trust 
interests in Wall Street. While no equally prominent Republican 
politician has been publicly indentified with the industry of con- 
solidating industries, that party, like the Democratic, is ade- 
quately represented among trust organizers and managers. 

As to responsibility or credit for the anti-trust legislation 
which has been so plentifully enacted in state and nation 
no party capital whatever can be made on either side. The 
interstate commerce act and the Federal anti-trust statute 
were passed by Republican Congresses, the former having been 
introduced and championed by Republican Senator Cullom, and 
the latter by Republican Senator Sherman, while each measure 
received the pretty unanimous vote of Democrats and Republicans 
alike. The editor has ascertained through correspondence with 
the proper authorities in each case that the twenty-nine anti- 
trust laws now on the statute books of as many different states 
were enacted without any party division and usually with tlie 
solid support of both political parties. In Democratic states the 
Democratic party has naturally been responsible for these meas- 
ures, in Republican states the Republican, and as will be seen by 



1 



240 TRUSTS OR COMPETITION? 

the list of these laws published herein they are quite equally di- 
vided among Democratic and Republican states. Maine, the rock- 
ribbed Republican state, led off in point of date in 1889, while 
Texas, the rather robust Democratic state, has eclipsed all her 
sister commonwealths in the fullness and severity of her pro- 
hibitory and repressive laws. 

It has been recommended with earnestness, and from sources 
both intelligent and influential, to the Republican leaders in Con- 
gress, that as representatives of the party just now having both 
opportunity and responsibility, they bring forward immediately 
a resolution proposing an amendment to the Federal constitution. 
It is suggested that such proposed amendment should confer upon 
Congress broader powers than it now possesses to deal through 
legislation with the various aspects of the trust question, but 
particularly to suppress monopolistic combinations or aggregations 
attempting to carry on business in more than one state. Refer- 
ence is made, first, to the present very narrow limits of con- 
gressional power under the commerce clause of the Con- 
stitution, as applied by the United States Supreme Court iu 
the cases arising under the Federal anti-trust statute; second, 
to the apparent inability of each state acting singly to accom- 
plish desired results; and, third, to the assured impossibility of 
securing harmonious action by all the states. It is then urg >d, 
on, lower grounds, that even if such an amending resolution 
should fail to receive the support of the necessary two-thirds 
of each house, owing possibly to Democratic reluctance to en- 
large the powers of the Federal government, yet the formula- 
tion and proposal of such a measure in good faith by the Repub- 
lican party would free it from possible censure, and fix respon- 
sibility for defeat elsewhere. One adviser of the Republican 
party has put it thus tersely: "The responsible political party 
which does not move in this matter promptly, sincerely and 
vigorously, is lost." 

Mr. Bryan, answering the question whether a declaration against 
trusts by both political parties in their platforms for 1900 would 
put an end to the discussion, said: "Not at all,' because the Repub- 
lican Party has made a record that might cast suspicion on its good 
intentions, even though it were to declare against trusts. Why 
give that party four years more to do something promised when the 
present administration has done nothing?" 

In the platform for 1892, on which Mr. Cleveland and a Demo- 
cratic Congress were elected was this anti-trust plank: 

"We recognize in the trusts and combinations which are designed 
to enable capital to secure more than its just share of the joint prod- 
uct of capital and labor a natural consequence of the prohibitive taxes 
which prevent the free competition which is the life of honest trade, 



THE TARIFF AND THE TRUST. 241 

but we believe their worst evils can be abated by law, and we de- 
mand the rigid enforcement of the laws made to prevent and control 
them, together with such further legislation in restraint of their 
abuses as experience may show to be necessary." 

Mr. Bryan, who was a member of the Ways and Means Com- 
mittee of that Congress, has been reminded of this and of the fact 
that his own party, when thus in supreme power, did nothing to ob- 
struct or punish the trust, and hence that there is no ground for 
Democratic criticism of Republican inaction along the same line. It 
is retorted that at the time when the Democrats were thus tempo- 
rarily in control, there had not been sufficient experience with then ex- 
isting anti-trust laws to warrant further and immediate repressive 
legislation; that the Democratic president proved to be not in sym- 
pathy with the anti-trust attitude of his party and platform; hence, 
nothing could reasonably have been expected from him or from his 
. attorney-general; and that the Democrats now propose to atone for 
the former mistake by electing a president who will be a genuine and 
aggressive exponent of his party's anti-monopoly sentiment. Mean- 
while President McKinley s message of December, 1899, is stalwartly 
anti-trust. As to his attorney-general — ? 

The present ambiguous or waiting attitude of the labor 
leaders toward the trust question is somewhat embarrassing to 
the managers of both political parties. The rank and file of 
workmen apparently share fully the general feeling of opposition 
to trusts, but the labor union officials are acting the part of op- 
portunists, and carefully avoiding any definite commitment. 
This attitude characterized their utterances at the Chicago Trust 
Conference, nearly to the extent ^of robbing them of all signifi- 
cance. More recently President Samuel Gompers, of the Ameri- 
can Federation of Labor, has published in the national organ 
of that order an adroit article which is published herein, and 
which sufficiently illustrates what is here said. It indicates 
that the leaders of organized labor are prepared to make terms 
with the trusts, and at least refrain from joining any anti-trust 
crusade, political or otherwise. Whether the masses of wage 
earners are to be won over to this diplomatic policy remains to 
be seen. If so, the fact is likely to temper, to some extent, the 
anti-trust utterances of all political parties. 



THE TARIFF AND THE TRUST. 

There has been no really intelligent and ielpful discussion 
of the relation of the tariff to the various trusts. Free traders 
have made sweeping charges to the effect that the present 
X6 



242 TRUSTS OR COMPETITION? 

tariff is the cause and bulwark of nearly all monopolistic trusts, 
but Protectionists, on the other hand, have pointed to the fact 
that the greatest of all the trusts, the Standard Oil, produces a 
commodity which is on the free list. President Havemeyer of 
the Sugar Trust asserts that "the tariff is the mother of all 
trusts." but Mr. Havemeyer, himself, represents a tariff-pro- 
tected trust, which demands still more protection, and he is 
scarcely an authority on political economy. 

Undoubtedly there is an excellent opportunity for the Demo- 
cratic party to make a fresh onslaught on the protection policy 
by identifying it with the present trust movement, and with 
much of plausibility, if not of reason. It will be surprising if 
this attempt is not made. The situation is probably about this: 
A considerable number of the newer trusts are either rendered 
possible or are greatly aided by the existing tariff, and all trusts 
which have monopolized protected industries reckon upon the 
tariff as enabling them to hold prices at a higher level than they 
could under revenue duties. Plainly the Tin Plate Trust could 
not exist for a day without a high duty on the commodity it pro- 
duces. When President Reed of the American Tin Plate Com- 
pany recently testified before the Industrial Commission, he was 
asked whether that industry could have been consolidated into a 
trust, but for the tariff. He replied: "There would have been 
nothing to consolidate." This is doubtless true, but it is not 
clear that with the industry established as it now is a much lower 
duty will not serve all legitimate purposes. The National Salt 
Company is another trust which depends absolutely on the tariff 
for existence, but it is also true that the American Salt Industry, 
except in the west, no matter how owned, would go to the wall 
but for a duty on foreign salt. When salt is on the free list 
English salt is brought to our seaboard cities in ballast (freight 
free) while it costs $2 per ton to transport salt to our seaboard 
from the nearest producing points in New York state. In regard 
to the general list of protected industries which have been ab- 
sorbed by trusts, many insist that the tariff should be promptly 
lowered all along the line to a point which, while producing suffi- 
cient revenue, will prevent these protected trusts from earning 



THE DEPARTMENT STORE. 243 

dividends on the immense volume of water included in their 
capitalization. Over against this contention, the friends of pro- 
tection point to the present times of abounding prosperity as re- 
salting from the protective system embodied in the Dingley tariff 
and protest against a return to, a low tariff with commercial de- 
pression simply to hurt the trusts. 

This, of course, is obvious: If a trust has a virtual monopoly of 
an industry for the United States, a chief restraint upon it is the 
possibility of competition from foreign countries. Now if a tariff 
wall tends to shut out all foreign competitors, the higher that 
wall is the more completely is foreign competition excluded and 
the more completely are American consumers placed and held at 
the mercy of the protected American trust. 



THE DEPARTMENT STORE. 

Objections to it Stated— Criticisms Answered— No Resemblance to the Trust- 
Succeeds Because it Serves the Public— It is Opposed to Monopoly— Views 
of Hon. John Wanamaker. 



Those who regard the department store as an unwholesome and 
injurious feature of recent trade conditions hold that it closely 
resembles the industrial trust in its effects if not in its methods; 
that it seeks and tends to monopolize retail merchandising, or at 
least to concentrate it in the hands of a very few, when it is better 
for the public welfare, viewed largely and in the long run, that 
traffic of this nature should be divided among many independent 
dealers; that it drives out of business thousands of middle-class 
merchants and ishopkeepers, together with their employes, and ren- 
ders but a fractional and inadequate return for this injury to so- 
ciety and to individuals, by furnishing employment on salaries or 
wages to a part of those former proprietors whom it has displaced; 
tha^t it thus tends to lower ^he level of our citizenship by eliminating 
or greatly diminishing the number of independent employing trades- 
men and dividing the mercantile element of each large city into 
two classes, consisting on the one hand of half a dozen multi- 
millionaire owners of vast department stores, who have no need 
for their additional millions and continue in business chiefly for the 



TRV8T8 OR COMPETITION t 

excitement of further accumulation, and on the other hand several 
thousand employed persons of both sexes, parts of a great ma- 
chine, with identity largely lost, and dependent for continued liveli- 
hood upon the continued favor* of intermediate bosses, whose caprice, 
prejudice or nepotism may at any time find a cause for compassing 
the removal of competent and faithful subordinates. 

The other side is this: Whatever may be the merits or de- 
merits of the department store, and whatever society may finally 
conclude to do with it, it broadly differs from the trust in this — 
that it does not attempt to obtain a monopoly of trade by the 
artificial device of purchasing and absorbing all competing stores; 
if it draws custom from neighboring merchants it does so by being 
able, through its larger facilities, to furnish habitually a greater serv- 
ice for the money paid, some legitimate advantage in price, variety, 
quality or convenience, or in all of these; it enables its patrons to 
purchase under one roof practically all needed commodities from 
needles and coffee to carpets and pianos; it saves time and avoids 
wear and tear by permitting of "one payment, one delivery and 
one ringing of the door bell" as the result of a day's shopping; 
it has thus far shown no tendency to form combinations with other 
department stores to shut out competition, maintain prices or limit 
supply; it cannot and does not prevent competing department stores 
from starting and continuing in the same field, as witness the suc- 
cessful and unopposed invasion of New York City, first by Siegel, 
Cooper & Co., and then by Wanamaker, to compete with Macey and 
others long established there;, it cannot and does not escape the 
keenest actual competition from other equally strong concerns; 
it is not fcept on its good behavior by "potential competition," but 
by perpetual and sleepless rivalry at its elbow. A recent canvass 
of St. Louis is said to have developed the fact that there are in that ; 
city as many small retail stores, each supporting from one to three 
independent proprietors, as there were before the development of the 
modern department store. In any large city, convenience of distance 
must always maintain a great many thrifty stores and shops not 
conducted on the department or conglomerate plan. 

In Illinois and Missouri, and possibly one or two other states, 
legislation has been recently enacted for levying a special license 
tax on department stores, the object being not revenue, but the dis- 
couragement of the tendency toward this form of merchandising, and 
the aiding of ordinary merchants and dealers to compete with the 
mercantile giants. Cases to test the constitutionality of some of 



VIEWS OF JOHN WAXAMAEER. 245 

these acts are now pending. The weight of legal opinion is on the 
side of their unconstitutionality on the ground that they represent 
class legislation and involve unequal and unfair taxation. 

On December 18, 1899, the Supreme Court of Illinois declared 
unconstitutional the ordinance of the Chicago City Council, which 
prohibited any store which sells dry goods from also selling under 
the same roof, provisions, groceries or liquors. The court held that 
such legislation could only be valid when necessary to protect the 
public health, - and as no such basis was claimed in this case, it vir- 
tually deprived the citizen of his property without due process of law. 

In his recent testimony before the Industrial Commission (De- 
cember 9, 1899), Hon. John Wanamaker made some interesting 
statements and expressed some fresh opinions from the standpoint 
of an expert. Briefly summarized his points were these: (1) The 
department store has no other right to exist than that which comes 
from its service to society. The rights of owners of such establish- 
ments are subordinate to the welfare of the public. The modern 
department store, properly conducted, is a distinct benefit to so- 
ciety, and its success is not secured at an undue cost to the com- 
munity. While the ordinary motive of money-making inspires own- 
ers, yet that purpose is not inconsistent with advantage to the pub- 
lic. (2) The modern department store is not an artificial device, but 
a natural evolution from modern economic conditions. Some of those 
conditions are, command of cheaper and more abundant capital, 
better transportation and quicker transmission of intelligence, de- 
velopment and concentration of executive capacity, the evolution 
of the science of organization, the determination of producers to 
reach consumers directly and the tendency of trade to move along 
the lines of least resistance. (3) Economy in the expenditure of 
money, time and effort measures the success of the department store. 
Just in proportion as these ends are secured by it is it popular and 
successful. Through the better economic conditions, resulting from 
great concentration and organization of distribution by the depart- 
ment store, the whole business is handled more cheaply and the 
consumer gets the benefit of this vast saving. The manufacturing 
producer sells and the department store buys from him in very large 
lots; the former reduces his risk of loss and often wholly saves 
his usual expense of selling. There are no intermediate profits 
or commissions to jobbers, commission dealers, agents or other 
middlemen. All along the line economies result and there is every 
reason why the department store should reduce retail prices, since 
such reduction represents a saving. Prices are reduced to the 
consumer very largely. All of the reductions in prices created by the 
producer's or manufacturer's savings, plus thj reduction in retail 
profits consequent upon the concentration of large distribution at a 
single point, should go to the consumer. That this is the practical 
result is shown in the low retail prices that generally prevail. 

Upon American dry goods generally the retailer's percentage 
of profits has been reduced one-half during the last twenty years. 



246 TRUSTS OR COMPETITION? 

This is true upon woolen, silk and cotton fabrics. The total per 
cent of reduction in prices to the consumer cannot be stated owing 
to the varying standards of qualities and taste and improvements 
in manufacture. But the consumer saves the entire reduction in the 
retailer's profit. It can also be stated with a fair degree of cer- 
tainty that the net profits of the great retail stores vary from 3 to 6 
per cent on the dollar of business done. Thus it will appear that 
the modern retail merchant is giving public service at a rate of 
profit so small as to be merely a commission. There does not exist 
in retail business any known combination for the control of any 
merchandise, nor for the fixing of prices either in the interests of 
merchants or manufacturers. The entire practical influence of the 
modern department store is powerfully against monopoly in any 
branch of manufacturing or selling. Retail merchants, in common 
with the public, may be the victims of combinations to control 
prices and create profits, but they are not and never have been par- 
ties to such measures. Public service is the basic condition of retail 
business growth. To give the beist merchandise at the least cost is 
the modern retailer's ambition. He cannot control costs of pro- 
duction, but he can modify costs of distribution and his own profits. 
His principle is the minimum of profit for the creation of the maxi- 
mum of business. It is possible for retail merchants in several lo- 
calities to combine purchases for the sake of economy, but such co- 
operation differs widely from the organization commonly known as 
trusts. Neither would it affect retail prices, save to reduce them. 
More than the total number of persons thrown out of employment 
in wholesale and retail stores by modern competition find employ- 
ment in the department stores at increased remuneration. 

Evidently referring to his own business, Mr. Wanamaker said: 
"Within its organization are numerous places that for liberality of 
compensation would be more attractive than 90 per cent of the 
presidencies of the banks, trusts or insurance companies of the 
United States. It has places that pay salaries between $5,000 and 
$20,000 a year, and other positions that command between $2,000 
and $5,000 a year. This line of analysis could be carried to the 
lower classes of employment and the resulting facts would be in. 
harmony with the proposition that the employes of the store in 
question are better off than they could be possibly if engage^ in 
small retail storekeeping. Department stores have shortened the 
hours of labor, and by systematic discipline have made it lighter. 
The small store is harder upon the sales person and clerk. The 
effect upon the character and capacity of employes is good. A well- 
ordered modern department store is a means of education in spelling, 
writing, English language, system and method. Thus it becomes 
to the ambitious and serious employe, in a small way, a university 
in which character is broadened by intelligent instruction practically- 
applied. The department store of the period is beneficial to so- 
ciety, and therefore has a substantial, economic and moral basis 
for its existence, " 



VIEWS OF LABOR LEADERS. 247 

TRUSTS AND ORGANIZED LABOR. 

In the "American Federationist" for October, 1899, Samuel 
Gompers, president of the American Federation of Labor, has the 
following article, purporting to indicate the attitude of organized 
labor toward the trusts. It will be observed that its tone is not 
unfriendly to them: 

PRESIDENT GOMPERS' VIEW. 

A Word on Trusts.— We are all conscious of the giant strides 
with which industry during the past decade has combined and con- 
centrated into the modern trust. There is considerable difference 
of opinion, however, as to what is regarded by many as an intoler- 
able evil. Organized labor is deeply concerned regarding the "swift , 
and intense concentration of the industries," and realizes that unless 
successfully confronted by an equal or superior power there is eco- 
nomic danger and political subjugation in store for all. 

But organized labor looks with apprehension at the many panaceas 
and remedies offered by theorists to curb the growth and development 
or destroy the combinations of industry. We have seen those who 
knew little of statecraft and less of economics urge the adoption. of 
laws to "regulate" interstate commerce and laws to "prevent" com- 
binations and trusts, and we have also seen that these measures, 
when enacted, have been tne vory ins* rumen's employed to deprive 
labor of the benefit of organized effort, while at the same time they 
have simply proven incentives to more -subtly and surely lubricate 
the wheels of capital's combination. 

For our part, we are convinced that the state is not capable of 
preventing the legitimate development or natural concentration of 
industry. All the propositions to do so which have come under our 
observation would beyond doubt react with greater force and 
injury upon the working people of our country than upon the 
trusts. 

The great wrongs attributed to the trusts are their corrupting in- 
fluence on the politics of the country, but as the state has always been 
the representative of the wealth possessors we shall be compelled to 
endure this evil until the toilers are organized and educated to the de- 
gree when they shall know that the state is by right theirs, and finally 
and justly come to their own, while never relaxing in their efforts 
to secure the very best possible economic, social and material im- 
provement in their condition. 

There is no tenderer or more vulnerable spot in the anatomy of 
trusts than their dividend paying function, there is no power on 
earth, other than the trade unions, which wields so potent a weapon 
to penetrate, disrupt, and, if necessary, crumble the whole fabric. 
This, however, will not be necessary, nor will it occur, for the 
trades unions will go on organizing, agitating and educating, in order 
that material improvement may keep pace with industrial develop- 
ment, until the time when the workers, who will then form nearly 



248 TRUSTS OR COMPETITION? 

the whole people, develop their ability to administer the functions of 
government in the interest of all. 

There will be no cataclysm, but a transition so gentle that most 
men will wonder how it all happened. 

In the early days of our modern capitalist system, when the in- 
dividual employer was the rule under which industry was conducted, 
the individual workmen deemed themselves sufficiently capable to 
cope for their rights; when industry developed and employers formed 
companies, the workmen formed unions; when industry concentrated 
into great combinations, the workingmen formed their national and 
international unions; as employments became trustified, the toilers 
organized federations of all unions — local, national and international — 
such as the American Federation of Labor. 

We shall continue to organize and federate the grand army of 
labor, and with our mottoes, lesser hours of labor, higher wages, 
and an elevated standard of life, we shall establish equal and exact 
justice for all. "Labor Omnia Vincit." 

GENERAL SECRETARY WHITE. 

[Of the United Garment Workers Association.] 

We are witnessing a transformation in business methods as com- 
plete and as sweeping as the industrial revolution of a century ago. 
The latter came as the result of scientific progress, and the present 
one is due to the evolution of competitive business. They were both 
necessary to social progress, although it has been attained at the 
cost of much suffering. Just as Nature works out her ends in a 
large way — without regard to individual cases — so with society, 
and we must adjust ourselves to the change. The trusts are here 
to stay; we must look the situation in the face and endeavor to remedy 
the evils which have come with them. Now, what are these evils 
which have aroused such antagonisim, and which one is the greatest? 
I think it will be agreed that it is the despotic power which the 
aggregations of wealth* con wield and. by which courts are in- 
fluenced, legislatures controlled and privileges purchased. Thfi& 
constitutes a real menace. History and our own experience teach 
how irresponsible power is usually abused. The industrial combina- 
tions are irresponsible, because individuals who comprise them, while 
sharing in the profits, disown personal responsibilities for the man- 
agement, and their purposes are sordid, although they serve the pur- 
pose of society. That is why it is imperatively necessary that they 
should be controlled and their affairs regulated so that they will be 
confined to their proper sphere of activity. This is the real problem. 

Our legislatures, we know only too well, are limited in their re- 
sponsibilities. What is needed, in order to meet this new situation, 
is a larger control over legislation on the part of the people, and for 
that reason I suggest the wider extension of the referendum princi- 
ple, by means of which important laws ,would have to be sanctioned 
by vote of the people before going into effect. The labor organiza- 
tions have endorsed the principle, and, if generally introduced, I 
think it would tend to allay the alarm felt over the growing power 
of corporations. The effect the trusts have upon the middleman, 
and the disarrangement they cause, I regard of secondary im- 



SOCIALISTIC OUTCOME PREDICTED. 249 

porta nee, because the systematic organization of industry, by means 
of which production is cheapened, without requiring reduction in 
wages, extends consumption and widens the opportunities for em- 
ployment. This more than compensates for the temporary dis- 
placement which the economy of the trust method makes necessary. 
The distinction must be made that wherever trusts are artificially 
created — through a monopoly franchise, special privileges and other 
advantages — our efforts should be directed towards removing the 
means which enable the corporation to control the market other 
than by merit and superior service. Now, on this question it is 
anxiously asked — where do the trades unions stand? Well, the 
average union member thinks just as the ordinary individual does, 
with this difference: He has the advantage of the practical educa- 
tion which the union affords. Its meetings are really classes in 
political economy. He is forced to face and understand things 
a^s they are. He is not idly lamenting the past or worrying about 
the future in a way to make him morbid. This is particularly true 
of the leaders of the movement, and it is remarkable how the think- 
ing men and the heads of the national unions whom I have consulted 
are agreed as to the attitude to take, and that policy is to watch 
developments closely, and be governed by the attitude of the trusts 
toward their movement; in the meanwhile to strengthen their organi- 
zations so as to prepare for any hostile action and meet organization 
with organization. So far the trusts have been making friendly 
advances — as, for instance, in the case of the glass and iron and steel 
trades, where long-term agreements have been entered into, and 
by which the workers share in some of the benefits of the trusts. 

The leaders are fully conscious also of the dangers which confront 
them should the powerful corporations, when they feel more secure, 
attempt to crush the movement; but instead of railing against them, 
they are preparing for the supreme trial. That they will be equal 
to the test, I have no doubt, because the movement for economic 
democracy has proceeded too far to be destroyed. We know that 
where workingmen are employed in larger groups they can be more 
readily united, and there is no power which can withstand them 
when animated by a common purpose. If, perchance, trade unions 
should be destroyed, it would be a calamity indeed, because demo- 
cratic institutions cannot exist where the workers are dependent or 
servile. The unions have their faults, because they are composed 
of persons with usual shortcomings and incapacities, but their great 
merit is this: That they instill the spirit of self-help and create 
higher aspirations; they represent the movement of the mass of the 
people for a larger share in the benefits of civilization, and for a 
higher standing in society. The very reverses which they have met 
with have made them more practical and broad-minded and as a 
consequence the unions have discarded the visionary agitation which 
once distinguished them. 



At the annual delegate convention of the American Federation 
of Labor, held in Detroit in December, 1899, the resolutions adopted 
took the position that the trust movement cannot be stopped nor 



250 TRUSTS OR COMPETITION? 

effectively regulated; that it will develop and proceed through the 
absorption of one trust by another, until practically a single trust 
monopolizes all leading industries, and then society will step in and 
claim its own by assuming ownership and control— in other words, 
that socialism, through government ownership is now the inevitable 
outcome of the trust contagion. This is a significant utterance. 



THE FLOUR-MILLING INDUSTRY. 

The writer of the following is Ex-Governor John S. Pillsbury of Minnesota, 
leading proprietor of the great Flour-Milling Industry of Minneapolis.— 
The Editor. 

[Contributed.] 

Office of the Pillsbury- Washburn Flour Mills Co. 
• Minneapolis, Minn., Nov. 2, 1899. 

Dear Sir:— We do not consider the forming of trusts, as 
generally organized, to be beneficial to the people of this country. 
One serious objection to the trust is the issue of what is termed 
w r atered or fictitious stock which does not represent actual values. 
As is well known, trusts are made up by the consolidation of sev- 
eral concerns, the properties of w T hich are put in at prices much 
beyond their actual values. The prices for goods manufactured 
must necessarily -be advanced in order to pay dividends on the 
amount for which the trusts are capitalized. For other reasons 
also, prices of goods manufactured can be and are made much 
higher to the home consumers than before the trusts were formed. 
The parties who form trusts are men whose chief interest is in 
the profits they can make. The managers are never satisfied with 
a reasonable profit, but are determined to make an exorbitant 
one. Enormous profits are always made by the promoters also, 
w T ho are the persons chiefly active in forming the trusts. After 
taking their profits, their interest in such concerns is ended. 
Many times a trust is formed largely of idle or inferior plants 
put in at exorbitant prices and kept idle thereafter for the pur- 
pose of controlling the market. The object is simply to destroy 
all competition. The trust of to-day is simply a monopoly. 

It is claimed that trusts are beneficial in that they increase 
our export trade by being able to compete in foreign markets. 
Is this not a very erroneous reason for creating trusts? How 
can a trust supply a foreign market where it is obliged both to 
compete with cheaper labor and to pay dividends on large amounts 
of stock which represents fictitious value? With trusts as 
formed in these days, I believe it to be a fact that prices in every 






SENATOR CHANDLER'S VIEWS. 251 



instance have been advanced for goods made whether such an 
advance was necessary or not. Not only have prices been ad- 
vanced, but wages of labor employed have often been reduced, 
as instance the case of the Linseed Oil Trust. 

The Pillsbury-Washburn Flour Mills Company preemptorily 
refused to put their flour mills or other property into a flour 
trust or to be a party to forming a monopoly in the flour trnde. 
We believe that stupendous flour trust, in order to pay higher 
dividends, and returns on the fictitious values of many of the 
inferior properties absorbed, would be obliged to advance the 
price of flour to consumers and to reduce the price of wheat to 
farmers-- a policy that this company would never countenance 
for a moment. The Pillsbury-Washburn Flour Mills Company 
believe in honorable competition in all respects, and we believe 
that w T e can pay fair dividends on our capital and still meet all 
honorable competition. We are willing to purchase our wheat 
in open market and to sell our product at a fair living profit. 
We do noi rely on a monopoly in our business and we do not 
believe in the forming of gigantic trusts in any business, for, as 
I have stated, the effect intended and the general tendency are 
to reduce the price of the raw material and to advance the price 
of the product manufactured. Very respectfully, 

J. S. PILLSBIIRY. 



A VOICE FROM NEW ENGLAND. 

By U. S. Senator W. E. Chandler, New Hampshire. 

[Contributed.] 

Concerning trusts, four points suggest themselves. (1) What 

isi a trust, as the term is used in present, discussion? (2) What 

are its alleged benefits? (3) What are its evils? (4) How and 
by whom should they, be suppressed? 

I. 

A trust is an association of separate individuals or corpora- 
tions having in view the control of the production of some article 
of merchandise and the increase of price thereof to the consumer 
by preventing competition in the sale of the product. Such a 
trust is usually made up of a combination of corporations, be- 
cause neither individuals nor partnerships of individuals are 
willing to invest sufficient capital in individual or partnership 
enterprises to accomplish the monopoly of the production and 



252 TRUSTS OR COMPETITION? 

the suppression of competition. In addition to trusts composed 
of various corporations, there is another trust, namely, a 3ingle 
corporation of sufficient magnitude to take control of the whole 
production of the article of merchandise and crush out competi- 
tion and keep up the price 

II. 

The alleged benefits of trusts are that production on a large 
scale allows the adoption of improved and cheaper methods, and 
that the economy of cost resulting will enable the producer to 
lower the price of the product to the consumer. 

III. 

The evils of trusts are that they do not in fact lower the price 
of the product to the consumer. They may do so temporarily, but 
in the end it is a just judgment to say they will result in higher 
prices than will be charged if trusts are suppressed. The econo- 
mies resulting from improved and cheaper methods of produc- 
tion undoubtedly lessen the cost of the article to the producer. 
What will he do with the gain thereby made? He may give it 
to the consumer* if he chooses, or he may pay it out in inordi- 
nately enlarged salaries to the managers of the business, or he 
may pay it in large dividends to the capitalists and thus build up 
their millionaire fortunes. What in all probability will the trust 
managers do with the saving they make in the cost of produc- 
tion? They are under no compulsion which will lead them to 
give it to the consumer through a reduced price, because there is 
no competition to force them to do this. Necessarily, as human 
nature is constituted, they will pay it out in enormous salaries t) 
their managers or in huge dividends to themselves. It must be 
considered a sound conclusion that if trusts multiply as they have 
during the last two or three years and go on unhindered to full 
ascendency, they will raise the prices of all commodities higher 
than they would have been without the existence of the trusts 
and under the influence of free competition. 

Here now we come to> the fundamental and fatal objection to 
trusts, and that is, that they are intended to destroy and will 
destroy competition in business pursuits in the business world, 
throughout, human society. The great foundation of human pro- 
gress is the right of private property. The best condition of 
human society is equality of opportunity in the business world. 
Individualism and the struggle of each man to create and ac- 
quire property has helped forward civilization and prosperity as 
no other agency has done. This topic might be enlarged upon 
at any length, but it is sufficient now to assert that the opposition 



METHODS OF TRUST SUPPRESSION. 253 

to trusts is based upon the certainty that if they are allowed 
to flourish unrestrictedly, they will destroy competition as a lousi- 
ness principle, crush out individualism and put the control of 
society, its property, its politics and its government, into the 
hands of opulent oligarchies. 

IV. 

How are trusts to be suppressed? In the simplest and easiest 
possible method — by the state legislatures which create corpo r a- 
tions. Trusts will never be very dangerous while maintained 
only by individuals or partnerships of individuals. The powers 
and functions of artificial persons, namely, corporations, are 
necessary to the success of huge combinations of capital. The 
state legislatures may therefore in the exercise of the police 
power of the state and their general powers of sovereignty and 
of their complete discretion to allow or suppress corporations 
within their borders, proceed to the suppression of trusts and 
monopolies by passing laws regulating and controlling the privi- 
leges of corporations. The national government does not charter 
corporations. The corporations under our present system are 
the creation of the state legislatures. To the legislatures the 
appeal should be made for defense against the oncoming despot- 
ism of trusts^ (1). A legislature may provide that separate cor- 
porations shall not contract with each other for the purposes 
which trusts seek to accomplish. (2) The legislature may 
specify the business which every corporation shall engage in and 
confine it to one subject of commerce. (3) It may limit the 
capital and debts of every corporation; that is to say, it may 
keep its size so small that it cannot be dangerous as a destroyer 
of competition. In other words, a legislature by suitable penal 
statutes can do all, and more than all, that is necessary to pre- 
vent the existence and operation of any monopoly consisting of 
one corporation, or of any trusts and monopolies consisting of two 
or more corporations. 

The national government has a broad field within which to 
suppress corporations, namely, the field of transportation and 
interstate commerce, and can supplement state legislation with 
powerful effect. The writer of this has not given special at- 
tention to the particular legislation in state or nation which 
should be enacted. Mr. Bryan has suggested that Congress 
might prevent a corporation of any state from doing business 
in another state, except under certain limitations. This would be 
a most unwise use of national power and an encroachment upon 
states rights to which even a strong federalist like myself would 
not wish to assent. If Congress can keep a state corpora- 



254 TRUSTS OR COMPETlTlONt 

tion out from other states except on its agreement to comply with 
certain conditions, each state can do the same thing. If Con- 
gress does this instead of the state legislature, that will be the 
beginning of the end •of states rights, and old-fashioned Demo- 
cratic principles will have been entirely abandoned by the Demo- 
cratic party. 

It remains to be said that it is folly to make assaults on the 
tariff in connection with opposition to trusts. The tariff is 
largely designed 1 to protect certain industries of this country 
which otherwise would be destroyed by competition from abroad. 
Take the tariff off woolen goods and every woolen mill in the 
United States would close in three months. This would indeed 
destroy all American trusts in woolens, but it would do infinite 
mischief to the country and no good to anyone, for the American 
consumers would be immediately placed at the mercy of foreign 
trusts. To destroy an industry in order to destroy a trust is rank 
folly, when the real object should be to destroy the trust and 
save the industry. Annihilating the industry crushes out the 
individual producer just as completely as it does the trust en- 
gaged in producing the article. The most serious obstacle now 
existing in the way of effectively suppressing trusts is the dis- 
position of the Democratic party to make its movement against 
trusts a part of a renewed assault upon that beneficent system of 
protection by tariff duties to American industries and American 
labor, which is alike the glory, strength and prosperity of the 
Republican party and of the whole United States. 

W. E. CHANDLER. 
November 1, 1899. 



THE ST. LOUIS ANTI-TRUST CONFERENCE 

The following recommendations were adopted September 21,«, 
1899, by the Anti-Trust Conference of Governors and Attorneys- 
General, held at St. Louis: 

The committee on resolutions, to which was referred several 
resolutions and papers in lieu of all of them, submit the fol- 
lowing, with the recommendation that it be adopted by this 
conference: That we believe the best present available reme- 
dies be along the following lines: 

"1. The enactment and enforcement, both by the several 
states and the nation, of legislation that shall adequately and 
fully define as crimes any manipulation or restraint of trade 
in any line of industrial activity, with provisions for adequate 
punishment both of the individual or the corporation that shall 



ANTI-TRUST CONFERENCE OF GOVERNORS, 255 

be found guilty thereof, punishment to the corporation to the 
extent of its dissolution. 

"2. The enactment by each of the states of the Union of legis- 
lation for the adequate and proper control and regulation of 
corporations chartered by that state, and we recommend as effi- 
cacious a system of reports to and examinations by state author- 
ity of the corporations organized under its laws, to the end 
that they be brought to a fair observance of the laws under 
which they are created. 

"3. The enactment by each state of laws that will prevent 
the entrance of any foreign-created corporation into its limits 
for any other purpose than interstate commerce except on terms 
*that will put the foreign-created corporation on a basis of equal- 
ity with the jlomestic-created corporation of the state entered 
and subject to the same laws, rules and regulations of the state 
that it enters, which are applicable to the domestic corporations 
of that state, and to this end we recommend legislation that 
would make it mandatory upon corporations seeking to engage 
in business outside the state of their creation that they procure 
licenses from the foreign state as a condition precedent to their 
entry into such state; such license to be granted on such terms 
and subject to such restrictions as will place the » corporation 
subject to the same control, inspection, supervision and regula- 
tion as the domestic corporation of that state, and subject to 
be revocable if the conditions thereof are violated. 

"4. The enactment of state legislation declaring that a cor- 
poration created in one state to do business exclusively in other 
states than where created shall be prohibited from admission 
into any state. This proposition is supported by decisions of 
the Supreme Courts of several states, but we believe it should 
become legislative enactment, uniform throughout the states. 

"5. That no corporation should.be formed in whole or in part 
by another corporation. 

"6. That no corporation shall own or hold any stock in 
another corporation engaged in a similar or competitive business, 
and that no officer or director of a corporation shall be an officer 
or director or the owner of stock in another corporation engaged 
in a similar or competitive business, the object or result of 
which is to create a trust or monopoly. 

"7. Recognizing that trusts are usually composed of corpora- 
tions, and that corporations are but creatures of the law and 
can only exist in the place of their creation, and cannot migrate 
to another sovereignty without the consent of that sovereignty, 
and that this consent may be withheld when desired, we recom- 
mend as the sense of this conference that each state pass laws 



256 TRUSTS OR COMPETITION? 

providing that no corporation which is a member of any pool or 
trust in that state or elsewhere can do business in that state. 

"8. That it is the sense of this conference that all the capi- 
tal stock of private corporations should be fully paid, either 
first, in lawful money, or second, in property of the actual cash 
value of the amount of the capital stock. And that in all pri- 
vate corporations with a capital stock issued in excess of the 
amount actually paid up, as above provided, the shareholders 
shall be liable to the extent of twice the face value of the 
stock held by each." 

COMMENT BY GOVERNOR SAVERS OF TEXAS. 

Next to the war itself and to the incidents directly connected 
with it, the wonderful revolution that has occurred in business 
life is calculated to arouse the greatest anxiety in all thoughtful 
minds. For the past quarter of a century we have heard much 
of trust formation, and notes of alarm have sounded, again and 
again, to warn the people af the danger that threatens them 
in that direction. But during the past two years that which 
was previously but a shadow on the horizon has become a dark 
and portentous cloud, and on every side and from every quarter 
are heard warnings of imminent danger that should no longer 
pass unheeded. 

Certainly, these aggregations of capital in such extraordinary . 
and unprecedented amounts, controlling, as they do, the production, 
distribution and sale of commodities in universal use, all under the 
management and direction of a few persons, cannot but excite grav- 
est apprehension in ,the mind of every thoughtful and patriotic citi- 
zen. The power which such associations can and do exert does not 
accord with the spirit and policy of free institutions. The possession 
of extensive authority, supplemented with the means for its arbi- 
trary and unrestrained exercise is always denied in every just and 
well regulated government. This, principle holds equally good in 
matters affecting industrial and economic life, where government 
has conceded privileges to one or few individuals that are not en- 
joyed by all. Every combination and association of any magnitude 
in this country under the name or guise of a trust, almost without 
exception, owes its existence to a governmental grant of privilege, 
exemption and power. In this form of business activity the individ- 
ual very rarely, if ever, ventures his entire wealth and credit, but 
shields himself under the protecting advantage and immunity of a 
corporate existence, created by statute. 

Were it not so, trust formations would be fewer in number, 
smaller in magnitude and less dangerous to society. The fact that 
the trust almost universally owes its very life to the creative power 
of public authority, makes it the imperative duty of government to 
protect the people against any abuse or misuse of its opportunities 
to the detriment of the general welfare. This is, in my opinion, 



COMMENTS BY GOVERNOR SAYERS. 257 

a complete answer to any objection that might be urged against 
governmental interference to restrain and, if needs be, to entirely 
destroy the trust power whenever it shall have become hurtful or 
perilous. 

The character of our government increases the difficulty of a 
prompt arid proper solution. 

Constitutional obstacles lie in the way and the evil can not be 
eradicated by either federal or state authority acting singly. There 
must be co-operation between both governments — general and local 
— each working earnestly and sincerely within its own sphere. The 
causes of the evil must be sought for, and when found must be 
removed. There appears to be a difference among intelligent and 
patriotic men as to how the subject should be dealt with. One class 
of thinkers attributes the trust to federal legislation only and con- 
tends that relief is to be found exclusively in the halls of Congress. 
Another class ascribes it to the policy of the states in the too 
liberal allowance of chartered rights and privileges for purposes 
that can not be considered public in their nature. 

Those who are familiar with the delay of Congress in accom- 
plishing reforms, will not allow themselves to be lulled into the 
belief that nothing must be done through local legislation to over- 
come the great and acknowledged evil that is to be considered by this 
conference; 

Again, however willing, Congress can only proceed to a certain 
extent in granting the desired relief. 

The rights of the states, as interpreted by the federal constitu- 
tion, will not permit a trespass upon the domain of local authority, 
and there are questions involved that must be determined by the 
Legislatures. Much of the trust power, it must be admitted, is due 
to corporate organization, and this is in turn indebted for its existence 
to local legislation. 

The conclusion, it occurs to me, is inevitable that in order to 
successfully meet this threatening danger, both the Congress and 
the Legislature—supplemented by the active, earnest and sincere ef- 
forts of executive authority and of an able, patriotic and incorrupti- 
ble judiciary — must be called into contribution, and each must be 
required to do its part under constitutional limitations and entire har- 
mony with the other. This movement cannot rightfully be construed 
as a war against capital. Far from it. Capital must be protected 
against its own unhallowed aggressions, or it will surely suffer the 
death of the suicide. It cannot be justly held an act of hostility to 
capital for the law to say to the strong and unscrupulous that the 
weak must not be destroyed. 

In making the few, who are so situated as to control large ag- 
gregations of money to know that such control shall not be ex- 
ercised to the injury of the people and of their institutions, war 
is not declared against capital. 



17 



258 TRUSTS OR C03IPETITI0X? 

SOME TRADE COMBINATIONS IN ENGLAND. 

The Birmingham Plan of Combination and Cooperation— A Minimum Wage 
and Minimum Selling Price— No Monopoly Attempted— Trades Union- 
ism Encouraged— Cut-throat Competition Stopped— Coercion Applied 
to Objectors— Spread of the System— Weak Points Developed— Some 
Pointed Criticisms. 

During the past few years, and notably since 1896, there has 
developed in Great Britain an economic and industrial movement 
as unique as it appears to be important. It seems to have no specific 
name, but inasmuch as it has had its origin and best demonstration in 
Birmingham, and Mr. E. J. Smith, who devised and first applied it is a 
Birmingham manufacturer, it may as well be identified as the Birm- 
ingham Plan of Combination with Co-operation. It has already 
earned a reputation for great success in practice, is being widely 
adopted by various manufacturing industries in England, and 1» 
profoundly stirring economic thought and interest in Great Britain 
and elsewhere. It is regarded by not a few statesmen, economists, 
manufacturers and representative workingmen abroad as furnishing 
a substantial and permanent remedy for the immeasurable evils 
heretofore wrought by destructive competitive warfare among mana- 
facturers and the resulting industrial warfare between often hard 
pressed manufacturers and their discontented employees. 

In a nutshell the method is this: The manufacturers in a given 
line, being tired of the war basis of doing business, meet in con- 
ference, and enter into an alliance offensive and defensive. They 
bind themselves not to sell without previous consent of the alliance 
committee below a certain scale of minimum prices, which is always 
above cost as carefully ascertained. They take their workmen into 
their counsels and confidence, and these bind themselves not to work 
for any employer who cuts scale prices. The manufacturers are 
attracted and held to the new plan by fixing prices high enough to 
give satisfactory profits. The men are attracted and held by an 
automatic system of profit-sharing, with arbitration and other benefits. 
The whole combination is held together, first, by honorable observance 
of the agreement; and, second, by a sharp-eyed committee which per- 
mits no rate-cutting or other breaches of faith. The door is open 
for every manufacturer present and prospective to enter the alliance 
on easy terms, and a competitor who remains outside and cuts prices 
is fought by the well-known trade methods and otherwise coerced into 
submission. 

(1) When a trade desires to form an alliance, the first step is 
to ascertain most carefully and conclusively the "actual costs of pro- 
duction." Political economists have stated that these are known 
to very few manufacturers. Mr. Smith is of a similar opinion. In 



COMBINATION WITH CO-OPERATION. % 259 

certain industries, where there is a great deal of intricacy in the 
manipulation of the raw materials and the manufactured article, it 
requires considerable scientific knowledge and patient work to ascer- 
tain costs. 

Having ascertained this element of cost, then to prevent manu- 
facturing being carried on at a loss, a minimum price scale is adopted. 
A representative article, like a certain pattern of bedstead or one 
dozen plates of a given size and shape, is taken as a basis to ascer- 
tain how much it costs to manufacture; the manufacturers agree on 
the minimum rate at which it can be made; then a certain percentage 
is added for profit, and this forms the minimum selling price for that 
article. The manufacturers bind themselves, by the rules of the 
alliance, not to sell, without the consent of the alliance, below this 
minimum price. The workmen are also offered certain interests in 
the success of the business, and, both parties being mutually de- 
pendent, there is no occasion for strikes, lockouts or trade disputes. 

No Monopoly Attempted. — Monopoly and monopolistic tendencies 
or prices are claimed to be rendered impossible by the fact that the 
door is left* open to every one. No restrictions are placed upon the 
admission of any reputable candidate for admission to an alliance. 

This policy of the open door makes it certain that enough new 
concerns will enter business, under the favorable conditions fur- 
nished, to prevent excessive profits. Besides, all members of an 
alliance are at liberty to compete with each other down to the level 
of the minimum scale agreed on. Each manufacturer keeps his own 
traveling men in the field, and pushes his business as interestedly as 
though there were no combination — for there is no pooling of results 
and each manufacturer's success depends as before on his own 
energy and effort, and the merit of his methods and his goods. 

The ordinary expenses of management are met by quarterly 
levies on the associated manufacturers. 

Inducements to the Employees.— (a) The wages, hours and condi- 
tions of labor existing at the time the employers' alliance is com- 
pleted are guaranteed as long as the alliance lasts, (b) A wages and 
conciliation board is formed, in which the workmen have an equal 
right in every way. This board has absolute power to settle all 
disputes which cannot be arranged in the respective works, on terms 
in keeping with the rules of each alliance. Any extraordinary con- 
ditions alreadv existing at date of forming an alliance may be 
brought before' the board for friendly advice, but it has no power to 
insist upon changes. But in all new questions its power is absolute; 
and if an agreement cannot be reached, an arbitrator is called in. 
whose decision must be accepted by both parties. So far, an 
arbitrator has never been needed. Until the dispute is settled, the 
workmen accept the employers' terms under protest. When the 
ouestion is settled bv the board, the decision is retroactive, so that 
the delay necessary to adjust the matter is not preiudicial to either 
party. Strikes and lockouts are thus made impossible. 

Trades-Unionism Fully Supported.— The employers, having formed 
a union amongst themselves, give their support to trades-unionism in 
every way. They employ none but unionists, so that the workmen 



260 TRUSTS OR COMPETITION f 

must form a union if none exists. On the otiaer hand, the workmen 
refuse to work for any but associated employers. If, therefore, any 
member of an alliance leaves or is expelled for any just reason, his 
workmen must leave his employment. While such a dispute lasts, the 
cost is shared equally between the two associations. 

During 1 the past two years such writers as Sidney Webb, Profes- 
sors of Oxford and Cambridge Universities, and several eminent po- 
litical economists of the continent of Europe have been studying the 
working of Mr. Smith's plan, and have written him in approval of it. 
Recently Secretary Hay of our Department of State, sent a repre- 
sentative to Birmingham to investigate, as did also the German 
Emperor. In Denmark, Canada, New Zealand and Australia the 
movement is said to be taking root. Mr. Smith expresses disapproval 
of the modern American trust system, believing that it is based on 
a wrong principle and tends to destroy individuality and cause over- 
capitalization, with resulting injustice to the public and unsafety to 
the industries themselves. Every one of the 52 manufacturers in 
the country is in the alliance. Prices have been advanced to ^the 
profit-producing point and the workmen in the entire industry are 
regularly receiving a bonus of about 30 per cent on the wages which 
they were receiving when the organization was formed, and strikes 
or other serious frictions are unknown. Mr. Smith is now kept busy, 
as an employed expert, helping to organize other industries than his 
own. Directly and indirectly his movement now affects more than 
30,000 operatives, 500 employers and stockholders representing $75,- 
000,000 of capital. He expresses the opinion that in less than ten 
years nearly all the factories of England will be running under the 
new system. 

At the recent Chicago trust conference Mr. A. W. Still, a 
Birmingham editor, contributed a paper in which he vigorously at- 
tacked Mr. Smith's system of trade combination. His main criticisms 
were: (1) That the plan involves monopoly of rather an offensive sort; 
(2) that, largely because of the successive bonuses or indirect in- 
creases of wages to workmen, it has been necessary to nearly double 
the selling prices of bedsteads, which is the particular industry in 
which Mr. Smith is interested; (3) this exorbitant advance in prices 
is oppressive to consumers, and has naturally and greatly stimulated 
outside competition and enormous expenditure has been necessary 
to resist this rivalry; (4) the high prices have also led to extensive 
secret underselling by members of the association and additional 
large expenditures have been necessary to detect and punish these 
infractions of rules; (5) and finally several leading concerns have 
withdrawn from the Smith Alliance because they were unwilling 
longer to participate in the agreed methods of coercing or "clubbing" 
competitors into joining the combination. Some of the Smith trade 
combinations, Mr. Still contends, show signs of dissolutfon because of 
these inseparable evils. 



SENATOR MARION BUTLER. 261 

THE POPULIST POSITION. 

Hon. Marion Butler, U. S. Senator for North Carolina, speak- 
ing for the Populist party or element which he represents, au- 
thorizes the following summary of his views for this volume: 

First remarking that both President Cleveland and President 
McKinley have fruitlessly gone out of their way to warn the 
country in official utterances against the aggressions of the 
Trusts, which everybody denounces and nobody obstructs, and 
that the Republican party and the Democratic party have in suc- 
cession enacted Federal anti-trust statutes, the Senator declares 
that so far all such legislation has been both insincere and futile 
—akin to an attempt to cure cancer with a sticking plaster, in- 
stead of removing from the blood the poison that produces the 
cancer. He submits that the only rational and effective way to 
remove trusts is by removing the causes that produce them. The 
prime cause of trusts, he declares to be this: The American 
people have permitted the capitalists and trust-tmilders to get 
and keep control of the three great instruments of commerce- 
Money, Transportation and the means of Transmitting Intelli- 
gence—in other words, the Currency, the Railways and the Tele- 
graph. 

These three great instruments of commerce are the all-power- 
ful agencies in the industrial world. For individual and inde- 
pendent business enterprises to spring up and prosper it is indis- 
pensable that every man and every business should have an equal 
opportunity to use these vital instruments of commerce on the 
same terms as his competitors. Therefore these agencies should 
not be in the hands of those who could use them to discriminate 
to destroy competition. The men in any country who control 
these instruments of commerce will thereby hold the fate of all 
the people in their hands and will become more powerful than 
the Government itself— indeed, will own and run the Govern- 
ment. Therefore, those life-giving or death-dealing instruments 
of commerce should be the property or under the control of all 
the people, open to all alike on equal terms. 

But with this trinity of natural monopolies in the control of 
a few dozen multi-millionaires with their retinue of satellites, 
urged on by the quenchless greed of gain and invited by oppor- 
tunities and rewards surpassing the dreams of avarice, trusts 
are not only possible, but inevitable in every line of trade* in- 
dustry and finance. 



262 TRUSTS OR COMPETITION? 

They are the three mother trusts— the trust on money, the 
trust on transportation and the trust on transmission of intelli- 
gence—and the few manipulators of these trusts have the power 
to put any and every business into a trust at will. During the 
last few years the American public have had almost every day 
striking object lessons of the truth of this statement. What is 
the result? To-day the few men who own and control the nation's 
instruments of commerce practically own and control every busi- 
ness enterprise in the nation. Competition is dead, and 75,000,000 
of people are at the mercy of a handful of rapacious plutocrats. 
This condition is here and here to stay until the people arouse 
from their lethargy, assert their power and resume control of 
the three agencies which are omnipotent in the business world. 
"Resume control" is used advisedly. When the founders of this 
republic w T ere doing their almost inspired work, they reserved 
to the people absolute control and management of the three 
potential instrumentalities referred to, as they then existed, thus 
establishing a precedent and principle capable of adaptation to 
any changes which time and development might bring. The cir- 
culating medium was made promptly responsive to popular 
needs. Transportation was then represented by the wagon-road 
and water-ways and the privilege of their use was made the prop- 
erty of the public and the equal convenience of all. The trans- 
mission of intelligence was solely by written or printed communi- 
cations and accordingly the postal service monopoly was made 
a government function and has so continued. But when the 
steam railway for all commercial purposes supplanted the wagon- 
road and water-ways, evil counsels prevailed and instead of being 
made public highways for the equal convenience of all citizens on 
equal terms, these natural monopolies unnaturally fell into pri- 
vate ownership and the personal control of the rew. When the 
telegraph, for all effective and practical purposes in business 
and in the gathering and distributing of public intelligence, re- 
placed the mails, evil counsels again prevailed and "private en- 
terprise" was once more permitted to usurp the place of the sov- 
ereign, the people, and to-day this tremendous engine of influence 
and power, the pulse-throb of seventy-five millions of dwellers 
in the greater republic, is absolutely controlled by five men, who 
are practically accountable to no superior. In an evil and un- 
guarded hour the control of the volume of our money passed 
into the hands of a foreign banking ring. In railway transporta- 
tion, one man, J. P. Morgan of New York, representing a Hebrew 
syndicate in London, is master of 75,000 miles of road in the 
United States, and sitting at a table in Wall Street with a dozen 
associates or subordinates, can any day raise or lower freight or 
passenger tariffs throughout the continent, discriminate for or 



GOVERNOR ROOSEVELTS VIEWS. 263 

against any section, interest or individual, build up one com- 
munity and crush another. So long as this is true, and so long 
as a trust or an allied group of trusts, by controlling the tele- 
graph, can at will suppress the truth, promulgate commercial 
fiction, color facts and edit the news columns of great journals, 
there is no hope or prospect of freeing the country from the grip 
of the Trust octopus. Return the three puissant instruments of 
commerce— money, transportation and the transmission of in- 
telligence—to the hands of the people, where they have always be- 
longed, and trusts and combines will surely retire, just as the 
tentacles of the devil-fish relax their hold when the monster is 
thrust through a vital part 



GOVERNOR THEODORE ROOSEVELT. 

In his speech at Akron, September 23, 1899. opening the 
political campaign for the Republicans in Ohio, Governor Roose- 
velt spoke as follows in relation to the trust issue as presented 
in that state: 

Our opponents [the Democratic party in Ohio] denounce 
trusts. But they propose not one remedy that would not make 
the situation ten times worse than now. I have read through 
carefully the speeches of Mr. Bryan and of his fellows to find out 
what they propose to do. I have found plenty of vague denuncia- 
tion. I have not found so much as an attempt to formulate a 
national policy of relief. In the Democratic platform in~ Ohio, 
just two measures of relief are proposed— the first, that you 
should change the tariff because it favors trusts; and the second, 
that you should coin silver in the ratio of 16 to 1 without regard 
to the action of any other nation. 

The two remedies our opponents propose— altering the tariff 
and debasing the currency— could have no possible effect in 
abating the evils of the trusts, and could hurt those who profit 
by the trusts only to the extent that they hurt every member 
of the American business community, from the capitalist to the 
day laborer. 

The Republican Remedy.— Our opponents say we Republicans 
have no remedial plan. We have. We propose to meet the prob- 
lem in the only way in which it can be met, by cool and careful 
study, by finding out what the facts are, and then by exhausting 
every legitimate power, legislative, administrative, and judicial, 
to regulate the industrial movement, and to cut out all abuses. 
Corporations (for what we commonly call trusts are generally 



264 TRUSTS OR COMPETITION? 

merely big corporations) render great services, and are indis- 
pensable instruments of industry in our modern life, but their 
growth has been accompanied by the growth of evils, which we 
can but remedy by common sense and common honesty— not 
demagogic outcry. 

More definitely our plan is, as a first step, to try the effect 
of publicity, and then to supplement publicity by taxation, and 
then by licensing or whatever measure experience shows to be 
effective. Before hitting we must know exactly what we are 
hitting at, and whether the blow will hurt more than it helps. 
The first thing to do is to provide for full investigation of and 
exhaustive report on all these corporations, especially all the cor- 
porations which have grown to be of such dimensions as to con- 
trol any considerable portion of a given trade, industry, or 
product— in short, those corporations which we mean when we 
speak of trusts. The mere letting in of the light will in itself 
cure many evils, especially those of overcapitalization, and the 
undue suppression of competition, and, as for the evils that 
remain, when once we can see them clearly and distinctly, the 
remedy can readily be devised without entailing upon the inno- 
cent the misery that will surely follow any blind and ignorant 
attempt to smash parts of our modern industrial machinery, with- 
out taking the trouble to find out their relations to our industrial 
life itself. 

Let us find out every important detail of the business of the 
great corporations examined, the amount of stock, the amount 
of bonds, the terms upon which issued, the salaries of the highest 
employes, the wages and aggregate of wages paid to the others, 
the output of the product, and the price at which it is sold, so 
that in each case we may find whether the combination has 
resulted in raising or diminishing production, prices and wages, 
and, in short, learn every detail Which will show exactly what the 
process has been. Especially let us find out whether the trusts 
have any unduly favored relations with great transportation 
companies, whether favors are shown them that are not shown 
their smaller competitors, in violation of fair play and of the 
spirit of our interstate commerce legislation. Let us find out 
the facts fully, and then let us act on these facts, by legislative 
or executive action. 



BANK SENTIMENT. 

Outside of the large cities of the Atlantic seaboard the 
attitude of banks and bankers is very generally in accord with 
that of the communities which they serve, namely* in opposi- 



VOICE OF THE SUGAR TRUST. 265 

tion to trusts. On October 11, 1899, at the annual convention 
of the Ohio Bankers' Association held at Columbus, a resolution 
was adopted to the effect that the convention "views with regret 
the tendency toward combinations of industries, especially when 
these combinations are organized on an unsound basis." 

About the same date the Illinois Bankers' Association held its 
annual convention in Chicago and in the course of his opening 
address the president, John L. Hamilton, used the following 
language, with the evident approval of the convention: 

This country is becoming alarmed over the rapid development of 
manufacturing and mercantile trusts, and there is certainly ground 
for alarm. It does not seem right and proper, this consolidation of 
industries into one gigantic organization for the control of any par- 
ticular line of business. It was no doubt brought about in many of 
the first organizations for the reason that the plants as they were 
then being run were not paying dividends upon their investments. 
The success of these first combinations has opened up a new field to 
the promoter and with the returning era of prosperity capital has 
come from its hiding and it has been possible to float almost any 
kind of an enterprise, regardless of its real merits. 

The consolidation of enterprises is working an injury to the 
banker, for it is driving many enterprises out of existence, thus 
crippling the earning capacity of our banks. Yet it would seem that 
the trust remains largely to be solved by the banker himself, for 
its success depends largely upon the credit that is given to its stocks 
and bonds as collateral security. The prudent banker, however, 
will see in these overcapitalized trust organizations an imminent 
danger for the future along financial lines. The great surplus of 
money at the present time finds the avenues of employment limited. 
These trust companies promise rich returns to the investors in their 
watered stocks. Money cannot lie idle while its owner needs the 
interest for the maintenance of himself and family. Thus these se- 
curities are finding a ready sale. But when the water is squeezed 
out and the real values are thus known will come the haste to 
realize, values will rapidly fall, collateral values will disappear, as 
the banks will not carry them, and we shall have a financial con- 
dition surcharged with the elements that may produce a widespread 
financial panic. The investment in these bewildering millions of 
trust combination securities seems t© me to be the financial cioud 
in the future. __^ 

PRESIDENT HAVEMEYER. 

Henry O. Havemeyer, President of the Sugar Trust, testifying 
before the Industrial Commission, June 13, 1899: 

The mother of all trusts is the customs tariff bill. The existing 
bill and the preceding one have been the occasion of the formation 
of all the large trusts with very few exceptions, inasmuch as they 



2G6 TRUSTS OR COMPETITION* 

provide for an inordinate protection to all the interests of the 
country — sugar refining excepted. Economic advantages incident to 
the consolidation of large interests in the same line of business are 
a great incentive to their formation, but these bear a very insig- 
nificant proportion to the advantages granted in the way of protect 
tion under the customs tariff. There probably is not an industry that 
requires a protection of more than 10 per cent ad valorem, and it is 
to obtain what is provided over such precentages in the tariff that 
loads to the formation of what are commonly spoken of as "trusts." 
With a protection to an industry not exceeding 10 per cent, all 
menace to the community by trusts would cease. This 10 per cent 
would represent the difference in cost of production, and likewise 
act as a protection against surface products of foreign countries 
being dumped in our local markets, thereby interfering with the 
regular and economic working of our industries. Any advantages 
that might then accrue to such combinations they would be fully en- 
titled to, and the public would not be damaged thereby, as any 
expansion of price would be met by foreign competition and relief. 
I have said that sugar was an exception. The rate of protection on 
sugar is an eighth of one cent per pound, which is about 3% per cent 
ad valorem, and does not equal the difference in the cost of refining 
between this and foreign countries. The least it should have is 
8 per cent, or, in specific figures, one-fourth of one cent per pound. 
The sugar refining industry of this country, no matter of what form 
its organization, is entitled to adequate protection if any industry is. 
There are at least 100,000 people dependent upon it. What it pays, 
or has paid, to its stockholders in the past represents nothing mora 
than a fair return on the capital invested, considering the extent 
of the business. We don't lay much stress on benefit to the con- 
sumer. We are in this for business. We try to keep the price down 
to keep out competition. We are in competition now, though, up 
to our throats. 



A CHAPTER OF POSSIBLE HISTORY. 

A Backward Glance— Rise and Decline of the Trust System— Vision of an 
Optimistic Pessimistx-AIleged Glimpse Beneath the Lid of Pan- 
dora's Box— A Taste of Socialism— An Untimely Interruption— All's 
Well That Ends Well. 



Washington, D. C, University of Universities, March — , 1925 
Class-room of Economic History. 
Pi m ofe$sor.~ "Gentlemen, I promised you that I would de- 
vote part of the class hour to-day to a rapid review of the 
rise and decline of the monopoly-trust system which fastened 
itself upon the industries of this country about the close of the 
last century, and of the successive steps by which the nation 
freed itself from that economic incubus. 



A CHAPTER OF POSSIBLE HISTORY. 267 

"First, then, bear in mind that the suddenness and magni- 
tude of the attempted revolution at first bewildered many. But 
from the moment that the real nature of the movement became 
known, the mass of the people, who were not in the trusts and 
who had some stake in the permanence of the social order, with 
that instinctive common sense which leads them aright in most 
emergencies, realized that they were face to face with a great 
peril. As to the extent of that peril and the course to be pur- 
sued in view of it, the widest diversity of view prevailed. 

"Then followed what has come to be known as the Great 
Debate, in which all classes and both sexes, from ocean to 
ocean, joined with the keenest interest but with singular free- 
dom from acrimony considering the strenuous nature of the 
controversy. For a time not a few so-called leaders of opinion, 
both in and out of Congress and State Legislatures, were quite 
at a loss what to do or say, and so they maintained an evasive 
silence or alternately blew hot and cold, now denouncing the 
trusts and now with equal energy denouncing any proposed 
remedy against them, while waiting to see which way the 
economic and the political cat would respectively jump. These 
gentlemen concurred in deprecating certain possible abuses of 
the power admitted to be possessed by the new monopolies, and 
they agreed in calling loudly for "regulation" by law, but they 
were equally and curiously sterile in definite suggestions which 
had in them aught of practical sense or value. Naturally all 
this was quite satisfactory to the trusts, which coolly ignored 
what their champions called the 'public clatter,' and quietly 
went on consolidating their power and fortifying their position. 

''As the wide debate progressed public opinion became 
aligned somewhat in this* manner: Nearly all who were pe : 
cuniarily interested directly or indirectly in any of the trusts, 
and they formed an important section of the population, to- 
gether with a considerable body of intelligent and high-minded 
citizens whose views were wholly impartial, including some 
students of political science, held that the monopoly-trust was 
a natural result of economic evolution, the inevitable culmina- 
tion of progressive enlargement of plants and capitals, in the 
interest of greater efficiency and economy in production, that 
its abolition was impossible even if desirable, and undesirable 
even if possible; that, like any other great business movement, 
this undoubtedly required reasonable regulation and control for 
the protection of the people against any serious misuse of ad- 
vantage. On the other side it was stoutly insisted that the 
trust system was artificial, unscientific, and, worst of all, an in- 
solent invasion of popular rights; that instead of requiring regu- 
lation or palliation it called for extirpation through a prompt 



268 TRUSTS OR COMPETITION f 

return to reasonable competitive methods. Of adequate ways 
and means of relief, however, none were in sight. 

"Meanwhile, with conviction confirmed on the part of the 
trusts that their position was legally and economically im- 
pregnable, results ensued which had been predicted as early 
as 1899. As the managers of trusts became more sure of their 
ground and less sensitive to public criticism, and as all talk of 
serious competition died away, trust prices for manufactured 
goods were progressively placed and held sharply above the 
level at which competition would have fixed them, and prices 
paid by the trusts for raw materials were held correspondingly 
low, competition from foreign buyers in some lines being the 
only downward limit. Thus monopoly profits were made both 
coming and going, while farmers and other producers of raw 
materials were mulcted both on prices of their sales and of 
their purchases. The gradual concentration of trust industrial 
plants at the East and in the environs of great cities in the 
Central states went noiselessly forward. No new factories, no 
enlargements of existing ones and no rebuilding of destroyed 
ones were observed in the towns and minor cities of the Cen- 
tral, Western and Southern states. Closed and dismantled fac- 
tories throughout these sections were popularly known as trust 
monuments. 

"The scores of thousands of bright young men annually 
turned out from American universities, colleges, academies and 
technical schools, found their opportunities in life reduced by 
one-half, thus introducing the element of a peculiar pathos into 
a situation already sufficiently strained. For, not only were 
most of the avenues to an honorable industrial career closed by 
the great change but the new method to an almost equal extent 
diminished opportunities in all professions which in any way 
depended for prosperity on a prosperous middle class in the 
community. Of course, this result was not intended by anyone 
but was the unavoidable result of an evil principle in action. 
Politics, municipal, state and national, became honeycombed 
with trust influence, and wherever it appeared it carried degra- 
dation and demoralization. The trust magnates, when corrupt- 
ing voters and legislatures, insisted that they were simply acting 
in self-defense— 'protecting the property interests of their share- 
holders against attacks of socialistic demagogues and their 
dupes.' 

"All restraints and popular safeguards seeming to be removed, 
the contagion of monopoly spread throughout society even into 
fields where it could not possibly get a permanent foothold and 
where its grotesque presence would have seemed ludicrous but 
for its short-lived outrages upon the defenseless community. Sim- 



LONGEVITY OF THE TRUST SYSTEM. 269 

ply as one of many examples of the widespread demoralization, 
in looking over newspaper files of that period, I notice that in 
1899 in the second city of the country all the dealers in 
plumbers' material entered into a monopoly 'combine' with the 
organized plumbers for a purpose which you will understand 
when I state its method of operation: First, no citizen, not a 
plumber, was permitted to buy any article of plumbing material 
from any dealer. On attempting to do so the astonished citizen 
was referred to 'his plumber.' Thus, if a low-salaried suburban 
householder wished to economize by making for himself some 
trifling repair to his kitchen sink, costing for material perhaps 
fifty cents, he was compelled, through inability to procure a bit 
of lead pipe, to employ a plumber, possibly with a helper, to 
come from the city and do the job; thus practically using up a 
working day and involving an expense of five to ten times the 
necessary outlay. Second, if the owner of a building under con- 
struction happened to have and wished to utilize some second- 
hand piping which he had saved from the former structure, he 
was informed by the boss plumber that his men would not 
be allowed to put it in place. He must buy new pipe from 
the dealer. 

"One event greatly disappointed the people and surprised 
many students of political economy: When some of the worst- 
managed and most absurdly overcapitalized trusts, after strug- 
gling to pay interest and dividends on their inflated valuations, 
began to show signs of distress and approaching dissolution 
there was a general hope and expectation that to a great extent 
a solution of the trust problem might be at hand— that as the 
trust system had been inaugurated in violation of sound eco- 
nomic laws, so now those laws were about to avenge themselves 
and apply their own remedy, as natural and economic laws 
have a habit of doing. But a curious phenomenon appeared. 
The same class of promoters and promoting bankers who were 
mainly responsible for the original trust system and who had 
gathered great fortunes from what came to be known as the 
'Industry of Monopolizing Industries,' having unloaded their 
trust securities, now reappeared with unimpaired appetites and 
started what also came to be called on the street the 'Industry 
of Wrecking and Reorganizing Monopoly-Trusts.' Employing 
as before the keenest legal wits that money could secure, these 
gentlemen, knowing all the ins and outs, undertook the business 
of closing down, liquidating, reorganizing and recapitalizing on 
a. reduced basis these collapsed concerns. Thus, instead of each 
failed trust breaking up into its original units, or even into 
independent groups, and reviving some measure of effective 
competition, the monopolistic feature was in every case strenu- 



270 TRUSTS OR COMPETITION? 

ously preserved, as the most valuable asset in the reorganized 
trust, and the monopoly system went forward with simply a 
change of capital and corporate name. This result might have 
been foreseen by those who recalled the fact that early in the 
new movement the so-called Cordage Trust was twice wrecked^ 
and reorganized but each time, in the language of the street, 
emerged a "water-tight and copper-fastened monopoly." A still 
more significant development was that scores of the weak and 
the mismanaged trusts were absorbed by the successful ones, 
the tendency thus being to merge all trusts into one, or, what 
was much the same, into a single close syndicate. 

"For a considerable period many excellent and usually in- 
telligent people were misled into a partial support, or at least 
a toleration, of the trusts by a group of skillful and plausible 
writers on political science, who could see no faults or dangers -in 
the trusts, and whose style of argument was at least transparent. 
I have been greatly amused while perusing some of their Sophis- 
tries in the light of subsequent experience. For example, two of 
their favorite and overworked syllogisms might be thus para- 
phrased: (1) In economics, whatever is is the result of evolution; 
whatever is the result of evolution is "here to stay;" therefore the 
new system of trust monopoly is permanent and unassailable. (2) 
All are free to compete. Where there is freedom to compete there 
can be no, monopoly. There being no monopoly there is no case 
against the trust, and popular protest is the result of ignorance 
and hostility to all corporations and all capital. 

"All these fallacies and sophisms were soon exposed, how- 
ever, and the people came to see with clear vision the problem 
that confronted them. But the events which did more than all 
else to unite the people in unyielding opposition to the trust 
system were these: 

"1. The various trusts, finding as usual that in union there 
is strength, formed a close Inter-Trust Alliance, or, as some 
called it, a 'Trust of Trusts,' under which, besides a covenant 
that one trust should not compete with another, their combined 
resources, espionage and political and financial influence were used 
to prevent or defeat adverse political action, or on occasion were 
all placed at the service of any one trust which was threatened 
either by attempted competition or a hostile decision of the 
courts. To these ends the alliance kept always on hand a gen 
erous 'fighting fund' and its mailed fist was often felt. 

"2. The organization of the Inter-Trust Alliance was soon 
followed with that of an International Trust League, whereby 
all the trusts in the United States entered into alliance with all 
similar organizations in other countries— for meantime the Ameri- 



AN INTER-TRUST ALLIANCE. 271 

can trust contagion had spread to Europe— the objects being sub- 
stantially the same as those of the Inter-Trust League, only 
made operative on the stage of the world. It had the additional 
purpose of preventing the competition of foreign trusts from 
interfering with the monopoly enjoyed by the domestic trusts 
in each country. 

"3. After these two measures had been perfected it trans- 
pired that the agents of the American Inter- Trust Alliance were 
busily at work endeavoring to unite all skilled workmen in 
trust employ in a movement adroitly named the Workmen's 
and Employers' Co-operative Guild. The plan involved an alli- 
ance between all workmen and their trust employers along 
these lines, reinforced by boards of arbitration and conciliation, 
etc.: Workmen should in any case receive a minimum, living 
wage. Their wages should be increased a certain per cent, as 
often as price of product was advanced above the cost level, 
and reduced correspondingly when prices were reduced, but 
wages should never go below the agreed minimum. All the 
workmen were to be organized in unions; were to bind them- 
selves not to work for any but a trust employer, and to use 
all 'legal' means to prevent other workmen from serving any 
employer who attempted to withdraw from or compete with 
a trust. On the other hand, by adroit manipulation of rules, the 
membership of the labor unions was to be practically and sharply 
limited and the employing trusts were to bind themselves never 
to employ non-union workmen. 

"This attempt to bring about an offensive and defensive 
'combine' between the allied monopoly-trust and organized la- 
bor, had the evident triple purpose of finally destroying even 
'potential' competition against the trusts, securing to them the 
good-will and political backing of the labor vote, and perma- 
nently placing the general public at the absolute mercy of 
monopoly prices and methods. Some labor leaders and a large 
section of the workmen favored the project and pointed to 
the results in the so-called Smithsonian or Birmingham move- 
ment, which had nearly doubled workmen's wages in seven 
years. What would have been the outcome but for interrupt- 
ing events, can only be conjectured. 

"4. The next historic episode of the great debate was this: 
At first, through anonymous contributions to the newspapers, 
then by special pamphlets, and well-written magazine articles, 
and finally by public conventions, there sprang up a serious and 
able discussion of the proposition that the natural and practical, 
if^ not the only, escape from the tyranny of private monopoly 
as embodied in the trust system was through the gateway of 
state socialism. Most of these writers and speakers were pes- 



272 TRUSTS OR COMPETITION? 

simistic as to the possibility of any return to the competitive 
plan. Some believed such a return would be unwise, even if 
feasible. It was suggested that nearly all old-time arguments 
against state socialism had been swept away by the trust 
deluge; that instead of having to consult tens of thousands of 
small proprietors, it would only be necessary to deal with per- 
haps threescore trust magnates; that instead of state socialism 
destroying the great middle class of independent manufacturers 
and dealers, the private monopoly system was already rapidly 
eliminating that class; that the same trained talent which was 
then efficiently managing the trust industries would willingly 
accept the nation as their employer instead of the trust, on 
conditions easily arranged. Jhe United States postal service, 
the largest and best-nianaged business establishment in the 
world, was the standing* and star argument of the state social- 
ists, the object lesson which was held to prove that, with a 
properly organized civil service, the nation could carry on with 
economy, efficiency and success any business, whatever its com- 
plexity or magnitude. 

"The veteran socialists of all schools and all shades of 
opinion in Europe and America were delighted with the out- 
look, and actually spoke of the United States as the soon -to-be 
Socialist Republic— the Paradise of the Experimenters, the Ca- 
naan of the Disinherited. The disciples of Bellamy proved to 
be far more numerous than had been suspected and they did 
not fail to make themselves heard. In several leading cities elec- 
tions were carried by a fusion of socialists, unemployed working- 
men and the general army of the discontented. Then followed 
bedlam in municipal affairs, prostration of public credit, demoraliz- 
ation and incredible corruption everywhere, crude and ruinous 
ventures in municipal management of "public utilities," and a 
reign of that peculiar tyranny and intolerable insolence which 
always mark the promotion of the self-appointed leaders of a cer- 
tain class to sudden and unaccustomed place and power. 

"The one argument which had weight with the mass of the 
people was this: 'If we are bound to live under a system of 
monopoly, let that monopoly be public and not private, respon- 
sible and not irresponsible, our own and not the perquisite of 
a privileged class; let its profits or benefits accrue to the people 
and not to the plutocrats, to the many and not to the few.' 
Almost these exact words formed part of the platform adopted 
in 1904 at the national convention of a numerous political party 
newly organized on tliis issue. The largest workingmen's or- 
ganization in the world, the American Federation of Labor, at 
its convention in December, 1899, resolved that the trust move- 
ment was irresistible, that it would advance until practically 



LOOK TO THE COURTS 273 

all industries were controlled by one organization, and then the 
people would step in and assume possession and ownership. 

"Meantime the exponents of the best citizenship indignantly 
pointed to this socialist tendency as the natural outworking of 
the monopoly-trust invasion. They charged that the trust was 
driving the people to socialism by the short cut. They shud- 
dered at the thought of such an alternative, but warned the 
leaders of all parties that if the people were finally forced to 
choose between the known evils of industrial monopoly in private 
hands and the unknown evils and benefits of a government 
monopoly, they would surely prefer the latter. And so, while 
remedies were delayed, the foundations of the social order were 
under discussion and the Great Republic stood face to face with 
a Great Temptation. During the period of which I speak occurred 
one incident which will interest you, for the double reason that it 
has som^ local color and also serves to illustrate the state of public 
feeling at the time. This university was then organizing and the 
trustees received an offer from a group of three monopoly mag- 
nates to furnish the entire desired endowment of fifty million 
dollars. By a unanimous vote the offer was courteously declined. 

"We now come to the final and pleasanter aspect of this 
singularly interesting epoch— to the record of those orderly 
events which happily resulted in solving the great problem, in 
abolishing the monopoly-trusts, in doing away with industrial 
bondage, and in substituting a system of effective but self- 
regulating competition, which, as you see around you, preserves 
the right of such honest capitalization and such centralization 
of production as enable manufacturers to reach the maximum 
of economic efficiency, and thus to compete in the world's mar- 
kets, but prevents every element of monopoly. All this was done 
without a resort to violence, socialism, or confiscation. You will 
be struck, I think, with the leading and most patriotic role 
played in this beneficial restoration by that splendid body of 
jurists who occupied the bench at the opening of the present 
century, both in state and nation. The clearness of vision and 
the patriotic courage^, with which they stripped from the trust 
all its disguises and brushed aside the cobwebs of legal sophistry 
behind which the managers and attorneys of the trusts believed 
themselves permanently secured, were invaluable to the people 
and simply changed the current of history. To them more than 
to all others combined is due the credit for the republic's 
Great Escape. The first real advance took the form of— 

(Here the university bell rang.) 

"—Gentlemen, to my surprise the hour is up. We will defer 
the final chapter in the history of. the rise and decline of the 
monopoly-trust system to another day." 

18 <m-. 



CHAPTER X. 
ANTI-TRUST LEGISLATION. 

Synopses of the Statutes Against Trusts and Monopolies Enacted by 
Congress, Twenty-nine State Legislatures and the Canadian Parlia- 
ment—Various Definitions of a Trust— Penalties Prescribed. 



[By ''domestic corporation" is meant a corporation organized under 
the laws of the particular state whose statute is under consideration. 

By "foreign corporation" is meant a corporation organized under 
the laws of some other state or country. 

By "civil damage clause" is meant that the law in the synopsis of 
which this expression occurs contains a provision to the effect that any 
person or corporation injured by any of the acts prohibited in the law 
may recover damages in a civil suit against the offending party.]. 

THE FEDERAL ANTI-TRUST STATUTE. 

Enacted by Congress and approved by President Harrison, July 
2, 1890. Title. — "An Act to protect trade and commerce against 
unlawful restraints and monopolies." The question of its applica- 
tion to railroad combinations was argued before the United States 
Supreme Court in December, 1893, on appeal from the Circuit Court 
of Appeals for the Eighth Circuit, and in March, 1897, a comprehen- 
sive decision w T as rendered (Mr. Justice Peckham), fully sustaining 
its constitutionality. As the authority of the United States to 
legislate in matters of this nature is derived wholly from those 
clauses of the Constitution which give to the Federal Government 
exclusive pow T er to regulate foreign and interstate commerce, and 
power to make law r s governing the territories and the District of 
Columbia, the scope of this statute is necessarily limited accordingly. 
In the following summary all material parts of the law are given 
verbatim: 

Provisions. — "Section 1. Every contract combination in the form 
of trust or otherwise, or conspiracy in restraint of trade or com- 
merce among the several states or with foreign nations is hereby 
declared to be illegal. Every person who shall make any such con- 
tract or engage in any such combination or conspiracy shall be deemed 
guilty of a misdemeanor, and on conviction thereof shall be punished 
by a fine not exceeding $5,000, or by imprisonment not exceeding one 

274 



FEDERAL ANTI-TRUST LAW. 275 

year, or by both said punishments, in the decretion of the court. Sec. 
2. Every person who shall monopolize or* attempt to monopolize, 
or combine or conspire with any other person or persons to monopo- 
lize, any part of the trade or commerce among the several states or 
with foreign nations, shall be deemed guilty of a misdemeanor, and, 
on conviction thereof, shall be punished by fine not exceeding $5,000, 
or by imprisonment not exceeding one year, or by both said punish- 
ments, in the discretion of the court." Sec. 3 declares illegal every 
contract, combination in form of trust or otherwise, or conspiracy, in 
restraint of trade or commerce in any territory of the United States 
or the District of Columbia, or between any territory and another, 
or between any territory and any state or the District of Columbia, 
or with foreign nations, and declares guilty of a misdemeanor any 
person who shall enter into any such contract or combination; the 
penalty being a fine not exceeding $5,000, or imprisonment not ex- 
ceeding one year, or both. Sec. 4 invests the Circuit Courts of the 
United States with jurisdiction to prevent and restrain violations, 
of this act, and makes it the duty of_ United States District At- 
torneys, under the direction of the Attorney-General, to institute pro- 
ceedings in equity to prevent and restrain such violations, by petition 
and injunction or otherwise. Sec. 5 authorizes the summoning of 
other parties, residing within or without the district w*here proceed- 
ings are brought. Sec. 6 provides that any property owned under 
any such illegal contract and being the subject thereof, and being in 
the course of transportation from one state to another or to a 
foreign country, shall be forfeited to the United States. Sec. 7 pro- 
vides that any person who shall be injured in his business or property 
by any other person or corporation by reason of anything forbidden 
in this act may sue therefor in any Circuit Court of the United States 
without respect to amount in controversy, and shall recover three- 
fold the damages sustained, cost of suit and reasonable attorney's 
fee. Sec. 8 defines "person" as herein used to include corporations 
and associations existing under or authorized by the laws of either of 
the United States, of any territory or of any foreign country. 

Alabama. — This state has limited its anti-trust legislation to a 
law prohibiting combinations of insurance companies from fixing 
and maintaining rates, approved February 18, 1897. Title. — "An 
Act to more effectively protect the people against combinations, con- 
spiracies and agreements between insurers, whereby rates of Insur- 
ance are raised or fixed." Provisions. — The preamble reads: 
"Whereas existing laws have proved inadequate to protect the people 
against combinations, conspiracies and agreements between insur- 
ers, whereby rates of insurance are raised or fixed by such practices, 
therefore, in order to suppress such combinations, conspiracies and 
agreements to the end that competition in business shall alone make 
such rates." In event of loss or damage under any policy issued 
after the passage of this Act the insured or assigns shall recover 25 
per cent, over and above actual loss or damage, if at date of issuing 
the policy or thereafter, but before time of trial of case, the in- 
surer was in any way connected with any "tariff association or such 
like thing by whatever name called," or had any understanding with 
any other person, corporation or association within or without this 



276 TRUSTS OR COMPETITION? 

state respecting rates; and no stipulation in su en policy or con- 
tract to arbitrate loss or damage or as to notice or proof of loss shall 
be binding on the insured. This statute shall be liberally con- 
strued to accomplish its object. 

Arkansas.— Approved March 16, 1897. Title.— "An Act to pre- 
vent combinations of trusts and corporations in the State of Arkan- 
sas." Provisions. — "Section 1. That from and after the passage of 
this Act all arrangements, contracts, agreements, trusts or combina- 
tions between persons or corporations, made with view to lessen, or 
which tend to lessen, full, and free competition in the importation 
or sale of articles of domestic growth or of domestic raw material, and 
all arrangements, contracts, agreements, trusts or combinations be- 
tween persons or corporations designed or which tend to advance, re- 
duce or control the price, or the cost to the producer or to the con- 
sumer of any such article or product, are hereby declared to be 
against public policy, unlawful and void." Every domestic corpora- 
tion which violates this act forfeits its charter, franchises and cor- 
porate existence. Every offending foreign corporation is prohibited 
doing business in the state. Violation of the Act is declared "de- 
structive of full and free competition, and a conspiracy against trade," 
and persons who as principals, managers, directors or agents, or in 
any other capacity, knowingly carry out any unlawful provisions 
of any such conspiracy shall be punished by fine from $500 to $2,000, 
or by penitentiary imprisonment from one to ten years. The Act 
does not apply to agricultural products nor live stock while in posses- 
sion of the producer. Any person injured or damaged by any such 
trust or combination may sue for and recover amount paid for any 
goods purchased therefrom. 

California.— Anti-trust legislation here is limited to "An Act to 
prevent combinations to obstruct the sale of live stock in the state 
of California," approved February 27, 1893. The law is'of strictly 
local bearing and of little consequence. 

Georgia. — Act approved December 23, 1896. Title. — "An Act 
to declare unlawful and void all arrangements, contracts, agreements, 
trusts or combinations made with a view to lessen, or which tend to 
lessen, free competition in the importation or sale of articles imported 
into this state, or in the manufacture or sale of articles of domestic 
growth, or of domestic raw material; to declare unlawful and void 
all arrangements, contracts, agreements, trusts or combinations be- 
tween persons or corporations designed, or which tend to advance, re- 
duce or control the price of such product or article to producer or 
consumer of any product or article; to provide for forfeiture of the 
charter and franchise of any corporation organized under the laws of 
this state violating any of the provisions of this Act; to prohibit every 
foreign corporation violating any of the provisions of this Act from 
doing business in this state; to require the Attorney-General of 
this state to institute legal proceedings against any such corporation 
violating any of the provisions of this Act, and -to enforce the penal- 
ties prescribed; to prescribe penalties for any violation of this Act; 
ta authorize any p'erson or corporation damaged by any such trust, 
agreement or combination to sue for the recovery of such damage, 
and for other purposes." * 



THE ILLINOIS STATUTE. 277 

Provisions. — Section 1 repeats almost verbatim the language of 
the foregoing title and declares all acts of the nature therein described 
to be "against public policy, unlawful and void." Sec. 2 forfeits the 
charter, franchises and corporate existence of any domestic corpora- 
tion, and excludes from doing business in the state any foreign 
corporation violating the provisions of the act; the Attorney-General 
being required to enforce these penalties. Violation of the Act is 
further declared to be "destructive of full and free competition, and 
a conspiracy against trade, and persons who engage in any such 
conspiracy, or who shall in any capacity whatever knowingly carry 
out any of the purposes herein prohibited, shall on conviction be 
fined from $100 to $5,000, and imprisoned in the penitentiary from 
one to ten years. The Act does not apply to agricultural products 
or live stock while in the possession of the producer or raiser. Airy 
person or corporation injured by any of the prohibited acts may sue 
and reover the full consideration paid for any articles controlled by 
any such trust. Judges of the Superior Court of the state are 
required to specially instruct grand jurors as to the provisions of 
this Act. 

Illinois. — Original statute approved June 11, 1891; in amended 
form approved June 10, 1897. Title — "An Act to provide for the 
punishment of persons, copartnerships or corporations forming pools, 
trusts and combines, and mode of procedure and rules of evidence in 
such cases." Provisions.— Section 1 reads: "If any corporation or- 
ganized under the laws of this or any other state or country for 
transacting or conducting any kind of business in this state, or any 
partnership or individual or other association of persons whosoever 
shall create, enter into, become a member of, or a party to, any pool, 
trust, agreement, combinatiou, confederation or understanding with 
any other corporations, partnership, individual or any other person 
or association of persons, to regulate or fix the price of any article 
of merchandise or commodity, or shall enter into, become a member 
of, or party to, any pool, agreement, contract, combination or con- 
federation to fix or limit the amount or quantity of any such article, 
commodity or merchandise to be manufactured, mined, produced or 
sold in this state, such corporation, partnership or individual or other 
association of persons shall be deemed and adjudged guilty of a 
conspiracy to defraud, and be subject to indictment and punishment 
as provided in this act: Provided, however, that in the mining, 
manufacture or production of articles of merchandise, the cost of 
which is mainly made up of wages, it shall not be unlawful for 
persons, firms or corporations doing business in this state to enter 
into a joint arrangement of any sort, the principal object or effect 
of which is to maintain or increase wages." Sec. 2 prohibits domes- 
tic corporations from issuing or owning trust certificates and pro- 
hibits corporations, their agents, officers and employes, directors and 
stockholders, from entering into any combination or agreement with 
persons or corporations, or director, or stockholder of the latter, to 
place the management or control of such combination or its manu- 
factured products in the hands of any trustee with the intent to 
limit or fix the price or lessen the price or sale of any article of 
commerce, use or consumption, or to prevent, restrict or diminish the 



278 TRUSTS OR COMPETITION? 

manufacture or output of any such article. Sec. 3 prescribes the 
penalties for violation of the Act: Either party may demand a trial 
by jury, and an offending corporation, company, firm or association 
shall, on conviction, be fined from $500 to $2,000 for the first offense; 
from $2,000 to $5,000 for the second; from $5,000 to $10,000 for the 
third offense, and $15,000 for each subsequent offense. Any officer, 
receiver or other representative of any corporation, company, firm or 
association, or any individual found guilty of violating the first sec- 
tion of this Act is punishable by a fine of $200 to $1,000, or by 
jail imprisonment not exceeding one year, or both. All contracts 
made in violation of the Act are declared void. Any purchaser of 
any commodity from any individual or corporation doing business con- 
trary to any preceding provision of this Act shall not be liable for 
payment therefor. The fines herein prescribed are recoverable in an ' 
action for debt in the name of the people of Illinois. In all cases 
a preponderance of evidence in favor of the people shall be sufficient 
to authorize a verdict and judgment for the people. Prosecuting 
attorneys in their respective jurisdictions and the Attorney-General 
are required to enforce this act. In case of conviction, the informer is 
entitled to one-fifth of the fine recovered and collected. All fines are 
required to be paid into the treasuries of the respective counties where 
the suits are brought, to be used for county purposes. 

Indiana.— ^Approved March 5, 1897, and almost a verbatim copy 
of the Georgia anti-trust statute. Title. — "An Act to declare unlaw- 
ful and void all arrangements, contracts, agreements, trusts or com- 
binations made with a view to lessen, or which tend to lessen, free 
competition in the importation or sale of articles imported into this 
state, or in the manufacture or sale of articles of domestic growth or 
of domestic raw material; to declare unlawful and void all arrange- 
ments, contracts, agreements, trusts or combinations betaveen persons 
or corporations designed, or which tend to advance, reduce or control 
the price of such product or article to producer or consumer of any 
product or article; to provide for forfeiture of the charter and fran- 
chise of any corporation organized under the laws of this state 
violating any of the provisions of this Act; to prohibit every foreign 
corporation violating any of the provisions of this Act from doing 
business in this state; to require the Attorney-General of this state 
to institute legal proceedings against any such corporation violating 
any of the provisions of this Act, and to enforce the penalties pre- 
scribed; to prescribe penalties for any violation of this Act; to 
authorize any person or corporation damaged by any such trusc, 
agreement or combination to sue for the recovery of such damage, 
and for other purposes." 

Provisions. — Section 1 reads as follows: "Be it enacted by the 
General Assembly, etc., that from and after the passage of this act 
all arrangements, contracts, agreements, trusts or combinations 
between persons or corporations, who control the output of any article 
of merchandise, made with a view to lessen, or which tend to lessen, - 
full and free competition in, the importation or sale of articles imported 
into this state, and all arrangements, contracts, agreements, trusts or 
combinations, between persons or corporations, who control the out- 
put of any article of merchandise designed, or which tend to advance, 



IOWA AND KANSAS. 279 

reduce or control the price or the cost to the producer or to the 
consumer of any such product or article, are hereby declared to be 
against public policy, unlawful and void." Sec. 2 forfeits the char- 
ter, franchises and corporate existence of any domestic corporation, 
and excludes from doing business in the state any foreign corpora- 
tion violating the provisions of the act; the Attorney-General being 
required to enforce these penalties. Violation of the Act is further 
declared to be "destructive of full and free competition and a con- 
spiracy against trade, and persons who engage in any such conspiracy, 
or who shall in any capacity whatever knowingly carry out any of 
the purposes herein prohibited, shall on conviction be fined from $100 
to $5,000, and imprisoned in the penitentiary from one to ten years. 
The Act does not apply to agricultural products or live stock while in 
the possession of the producer or raiser. Civil damage clause. 

Iowa.— Approved May 6, 1890. Title.— "An Act for the punish- 
ment of pools, trusts, combinations and conspiracies and as to evidence 
in such cases." Provisions. — Section 1 reads: "If any corporation or- 
ganized under the laws of this or any other state or country, for 
transacting any kind of business in this state, or any partnership or 
individual or other association of persons whosoever, shall create, 
enter into or become a member of, or a party to, any trust, agree- 
ment, combination, confederation or understanding with any other 
corporation, partnership, individual, or any person or association of 
persons, to regulate or fix the price of any article of merchandise or 
commodity, or shall enter into, become a member of, or party to, 
any pool, agreement, contract, combination or confederation to fix or 
limit the amount or quantity of any article, commodity or merchan- 
dise to be manufactured, raised, produced or sold in this state, 
shall be deemed and adjudged guilty of a conspiracy to defraud, and 
be subject to indictment as provided in this act." Sec. 2 prohibits 
corporations from issuing or owning trust certificates, and makes it 
unlawful for any corporation or representative or stockholder thereof 
to combine or agree with any person or corporation to enter into a 
combination or agreement with any other party with the purpose or 
effect of placing management or control of such combination or its 
manufactured product in the hands of trustees, with intent to limit or 
fix the price or lessen the production of any article or to prevent or 
restrict the output of any such article. Any corporation, company, 
firm or association violating this act is punishable by a fine of from 
one per cent to twenty per cent of the capital stock thereof or amount 
invested in such company, firm or association; officers, receivers or 
other authorized representatives thereof who violate the first section 
of this Act are punishable by a fine from $500 to $5,000, and in 
addition may be punished by jail imprisonment not exceeding one year. 

Kansas.— -Approved March 8, 1897. Title.— "An Act defining and 
prohibiting trusts, providing procedure to enforce the provision of this 
Act, and providing penalties for violations of the provisions of this 
Act." Provisions.— "Section 1. A trust is a combination of capital, 
skill or acts, by two or more persons, firms, corporations or associa- 
tions of persons, or either two of them, for either, any or all of the 
following purposes: First.— To create or carry out restrictions in the 



280 TRUSTS OR COMPETITION? 

full and free pursuit of any business authorized or permitted by 
the laws of this state. Second. — To increase or reduce the price of 
merchandise, produce or commodities, or to control the cost or rate of 
insurance. Third. — To prevent competition in the manufacture, mak- 
ing, transportation, sale or purchase of merchandise, produce or com- 
modities, or to prevent competition in aids to commerce. Fourth. — 
To fix any standard or figure, whereby its price to the public shall 
be in any manner controlled or established (lor) any article or com- 
modity of merchandise, produce or commerce intended for sale, use 
or consumption in this state. Fifth. — To make or enter into, or 
execute or carry out, any contract, obligation or agreement of any 
kind or description by which they shall bind, or have to bind, them- 
selves not to sell, manufacture, dispose of or transport any article 
or commodity, or article of trade, use, merchandise, commerce or 
consumption below a common standard figure, or by which tbey shail 
agree, in any manner, to keep the price of such article, commodity or 
transportation at a fixed or graded figure, or by which they shall, in 
any manner, establish or settle the price of any article or commodity, 
or transportation, between them or themselves and others, to preclude 
a free and unrestricted competition among themselves or others in 
transportation, sale or manufacture of any such article or com- 
modity, or by whidh they shall agree to pool, combine or unite any 
interest they may have in connection with the manufacture, sale or 
transportation of any such article or commodity that its price may in 
any manner be affected. And any such combinations are hereby de- 
clared to be against public policy, unlawful and void. 

Kentucky.— Approved May 20, 1890. Title.— "An Act to prevent 
the establishment of pools, trusts and conspiracies, and to provide 
punishments therefor." Provisions. — Section 1 reads: "That if any 
corporation under the laws of Kentucky, or under the laws of any 
other state or county (country), for transacting or conducting any kind 
of business in this state, or any partnership, company, firm or in- 
dividual, or other association of persons, shall create, establish, or- 
ganize or 4 enter into or become a member of or a party to, or in any 
way interested in, any pool, trust, combine, agreement, confederation 
or understanding with any other corporation, partnership, individual 
or persons or association of persons, for the purpose of regulating or 
controlling or fixing the price of any merchandise, manufacture, ar- 
ticles of property of any kind, or shall enter into, become a member of, 
or party to, or in any way interested in any pool, agreement, contract, 
understanding, combination or confederation having for its object the 
fixing or in any way limiting the amount or quantity of any article 
of property, commodity or merchandise to be produced or manufac- 
tured, mined, bought or sold, shall be deemed guilty of the crime of 
conspiracy and punished therefor as provided in the subsequent sec- 
tions of this act." Sec. 2 prohibits any corporation from issuing or 
owning, having or selling, trust certificates or stocks, and prohibits any 
representative of any corporation from entering into any agreement 
or understanding, verbally or in writing, the purpose or effect of 
which would be to place the control of any part of the business of 
such concern or its product in the control of any trustee or trustees, 
with the intent to limit, fix, establish or change the price of such 



LOUISIANA-MAINE. 281 

product. Any offending corporation is subject to a fine of from $500 
to $5,000, and any officer or representative of any such offending cor- 
poration or combination found guilty of any violation of this act is 
subject to a fine of $500 to $5,000, or jail imprisonment from six 
to twelve months, or both of these penalties. All contracts in con- 
travention of this act are void and not enforcible at law, Purchasers 
of property or articles from any person, firm, company or corporation 
transacting business contrary to the provisions of this act shall not 
be liable for the payment of the price for the same. Offending cor- 
porations forfeit their charter, franchise and corporate existence. 

Louisiana. — Approved July 7, 1892. Title. — "An Act to prevent 
trusts or combinations intended to restrain trade or to control the 
market value of merchandise, produce or commodities, and to pro- 
vide penalties and punishment of persons, corporations, firms and 
associations of persons connected with them, and to promote free 
competition in the state of Louisiana." Section 1 reads: "That after 
the passage of this act it shall be unlawful for any individual, firm, 
company, corporation or association to enter into, continue or main- 
tain any combination, agreement or arrangement of any kind, ex- 
pressed or implied, with any other individual, firm, company^ associa- 
tion or corporation for any of the following purposes: First. — To 
create or carry out restrictions in trade. Second.— To limit or reduce 
the production or increase, or reduce the price of, merchandise, produce 
or commodities. Third. — To prevent competition id the manufacture 
making, transportation, sale or purchase of merchandise, produce or 
commodities. Fourth. — To fix any standard or figure whereby its 
price shall be in any manner controlled or established of any article 
of merchandise, produce, commodity or commerce intended for com- 
merce in this state. Fifth. — To make or enter into or execute or 
carry out any contract, obligation or agreement of any kind or de- 
scription by which they shall bind, or have bound themselves, not 
to sell, dispose of or transport any article or commodity or article of 
trade, use, merchandise, commerce or consumption, below a common 
standard, figure or by which they shall agree in any manner to keep 
the price of such article at that fixed or graduated figure, or by which 
they shall agree in any manner to keep the price of such article at 
that fixed or graduated figure, or by which they shall in any manner, 
establish or settle the price of any article or commodity or trans- 
portation between them or themselves and others, to preclude a free 
and unrestricted competition among themselves or others in the sale 
or transportation of any such article or commodity, or by which they 
shall agree to pool, combine, or unite any interest they may have 
in connection with the sale or transportation of any such article or 
commodity that its price might in any manner be affected." Any 
violation of any of the provisions of this act is declared to be a con- 
spiracy against trade, and the penalties usually provided in anti-trust 
statutes against offending corporations, combinations, associations 
and individuals are embodied in the subsequent sections of the 
statute. 

M-aine.— Approved March 7, 1889. Title.— "An Act to prevent 
such formation of trusts, combination of business firms, incorporated 



282 TRUSTS OR COMPETITION? 

or unincorporated companies or associations of persons or stock- 
holders as may be contrary to public policy." Section 1 of the act 
reads: "It shall be unlawful for any firm or incorporated company, 
or any number of firms or incorporated companies, or any unincorpora- 
ted company, or association of persons or stockholders organized for 
the purpose of manufacturing, producing, refining or mining any 
article or product which enters into general use and consumption by 
the people, to form or organize any trust, or to enter into any com- 
bination of firms, incorporated or unincorporated companies or 
association of stockholders, or to relegate to any one or more board 
of boards of trustees or directors the power to conduct and direct 
the business of the whole number of firms, corporations, companies 
or associations which may have, or which may propose to form, a 
trust, combination or association inconsistent with the provisions of 
this section, contrary to public policy. ,, 

Subsequent sections prohibit and invalidate all certificates of 
stock or other evidence of interest under any trust, combination or 
association described in Section 1, and all deeds to real estate 
or mortgage thereon given by any person, firm or corporation for 
the purpose of becoming interested in such trust, combination or 
association; all offending corporations, combinations and associations 
are deemed guilty of a misdemeanor, and subject to a fine of $5 to 
$10,000, provided that every corporation or association interested 
in any trust at the date of enacting the statute shall have ninety 
days within Which to withdraw from the same. 

Michigan. — Approved July 1, 1889. Title. — "An Act declaring 
certain contracts, agreements, understandings and combinations un- 
lawful, and to provide punishments for those who shall enter into the 
same, or do any act in performance thereof." Section 1 reads: "That 
all contracts, agreements, understandings and combinations may be 
entered into or knowingly assented to by and between any parties 
capable of making a contract or agreement which would be valid at 
law or in equity, the purpose or object or intent of which shall be to 
limit, control or in any manner to restrict or regulate the amount 
of production or the quantity of any article or commodity to be 
raised or produced by mining, manufacture, agriculture or any other 
branch of business or labor, or to increase, control or regulate the 
market price thereof, or in any manner to prevent or restrict free 
competition in the production or sale of any article or commodity, 
shall be utterly illegal and void, and every such contract, agreement, 
understanding and combination shall constitute a criminal conspiracy, 
and every person who for himself personally, or as a member or under 
the name of a partnership, or as a member, agent or officer of a 
corporation, or of any association for business purposes of any kind, 
who shall enter into or knowingly consent to any such void and illegal 
contract, agreement, understanding or combination, shall be deemed 
a party to such conspiracy. And all parties so offending shall, on 
conviction thereof, be punished by a fine of not less than $50, nor 
more than $300, or by imprisonment in the county jail not more 
than six months, or by both such fine and imprisonment, at the 
discretion of the court, and the prosecution for offense under this 
section may be instituted and the trial had in any county where any 



MIXXESOTA— MISSISSIPPI. 283 

of the conspirators became parties to such conspiracy, or in which 
any one of the conspirators shall reside; provided, however, that 
this section shall in no manner invalidate or affect contracts for 
what is known and recognized at common law and in equity as con- 
tracts for the 'good will of a trade or business,' but all such contracts 
shall be left to stand upon the same terms and within the same 
limitations recognized at common law and in equity." Subsequent 
sections provide that: "Every contract, understanding or combination 
declared void and illegal by Section 1, is made equally void and 
illegal within this state, whether made and entered into within or 
without this state. The carrying into effect in whole or in part of any 
sudh illegal contract or understanding, and every act done for that 
purpose by any of the parties or through their agents, constitutes 
a misdemeanor, punishable with fine and imprisonment. Offending 
domestic corporations forfeit their charter and all rights thereunder. 
The provisions of the act do not apply to agricultural products or live 
stock while in the hands of the producer or raiser, nor to the services 
of laborers or artisans who are formed into societies or organizations 
for the benefit and protection of their members. 

Minnesota.— Approved April 20, 1891. Title.— "An Act to pro- 
hibit pools and trusts in the state of Minnesota." Provisions. — Section 
1 of the act reads: "If any corporation organized under the laws of 
this state, or any other state or country, for transacting or conducting 
any kind of business in this state, or any partnership or individual 
shall create, enter into, become a member of or a party to any pool, 
trust, agreement, combination or confederation with any other cor- 
poration, partnership or individual, to regulate or fix the price of 
oil, lumber, coal, grain, flour, provisions, or any other commodity or 
article whatever, or shall create, enter into, become a member of or a 
party to any pool, agreement, combination or confederation to fix or 
limit the amount or quantity of any commodity or article to be 
manufactured, mined, produced or sold in this state, shall be 
deemed guilty of a conspiracy to defraud, and be subject to in- 
dictment." Any offending person or corporation is, on conviction, 
subject to a fine of $100 to $5,000. Upon the trial of an indictment 
against a corporation or copartnership for a violation of Section 1 
of this act, all officers and agents thereof shall be competent witnesses 
against the defendent, and may be compelled to testify and produce 
all books and papers in their control pertinent to the issue. 

Mississippi. — The original act forms part of the "Enacted Code of 
the General Statute Laws of the State of Mississippi." This code was 
adopted in 1892, and, was amended March 11, 1896 The sections of 
the legislation referring to trusts are the sections in the code. Sec- 
tion 4437 reads: "A trust and combine is a combination, contract, 
understanding or agreement, expressed or implied, between two or 
more persons, corporations or firms or associations of persons, or be- 
tween one or more of either with one or more of the others: (a) In 
restraint of trade; (b) To limit, increase or reduce the price of a 
commodity; (c) To limit, increase or reduce the production or output 
of a commodity; (d) Intended to hinder competition in the produc- 
tion, importation, manufacture, transportation, sale or purchase of 



284 TRUSTS OR COMPETITION? 

a commodity; (e) To increase or forestall a commodity; (f) To 
issue, own or hold the certificates of stock of any trust or combine; 
(g) To place the control to any extent of business, or of the products 
or earnings thereof, in the power of trustees by whatever name 
called; (h) By which any other organization than themselves, their 
proper officers, agents and employees shall or will have the power to 
conduct or control the management of business; (i) To unite to pool 
interests in the importation, manufacture, production, transporta- 
tion or price of a commodity, and is now inimical to the public' wel- 
fare, unlawful and a criminal conspiracy. But this^ shall not apply 
to the associations of those engaged in husbandry in their dealings 
with commodities in the hands of the producer, nor to the societies of 
artisans or employees or laborers formed for the benefit and protection 
of their members." Subsequent sections provide: That every con- 
tract to enter into or pursue any trust and combine, or any contract 
with any member of a trust or combine, is void and non-enforcible. 
Every offending domestic corporation forfeits its charter and fran- 
chises, and every offending foreign corporation forfeits its right to 
do business in the state. Persons damaged by any such combination 
may sue and recover. Any combination to prevent free competition 
and bidding for the performance of any public work is made a 
misdemeanor punishable by fine. 

Missouri. — The original anti-trust legislation of Missouri was em- 
bodied in Chapter 128, Revised Statutes 1S89. This was repealed by 
statute approved April 2, 1891; to give wider scope, the Act of 1891 
was amended April 11, 1895, and again March 24, 1897. Title, "An 
Act providing for the punishment of pools, trusts and conspiracies 
to control prices, and as to evidence and prosecution in such cases." 
Provisions. — "Section 1. Any corporation organized under the laws 
of this or any other state^ or country, for transacting or conducting 
any kind of business in this state, or which does transact or conduct 
.any kind of business in this state, or any partnership or individual, 
or other association of persons whatsoever, who shall create, enter 
into, become a member of, or a party to, any pools, trusts, agree- 
ment, combination, confederation or understanding with any other 
corporation, partnerships, individual or any other person or as- 
sociation of persons, to regulate or fix the price of any article 
of manufacture, mechanism, merchandise, commodity, convenience, 
repair, any product of mining, or any article or thing whatsoever, or 
the price or premium to be paid for insuring property against loss 
or damage by fire, lightning or storm, or to maintain said price when 
so regulated or fixed, or shall enter into, become a member of or a 
party to any pool, agreement, contract, combination or confederation 
to fix or limit the amount or quantity of any article of manufacture, 
mechanism, merchandise, commodity, convenience, repair, any product 
of mining, or any article or thing whatsoever, or the price or premium 
to be paid for insuring property against loss or damage by fire, 
lightning or storm, shall be deemed and adjudged guilty of a con- 
spiracy to defraud, and be subject to penalties as provided in this 
Act." 

The provisions affecting insurance companies do not apply to 
insurance in cities of more than 100,000 population, but insurance 



MISSOURI. 285 

companies or boards of fire underwriters, which directly or in- 
directly in such cities, agree or attempt to agree, directly or in- 
directly to fix or regulate premiums for insuring property located out- 
side such cities shall be deemed to have forfeited their right to do 
business in the state, and to be liable to all other penalties of this Act. 
Sec. la declares to be "against public policy, unlawful and void/' 
any arrangement, contract, agreement or combination which tends 
to lessen full and free competition in any lawful business within the 
state, or which provides that any person or corporation shall deal in 
any particular article to the exclusion of other and competing articles. 
Entering into such arrangement is an act of conspiracy to defraud, 
and punishable. Sec. 2 prohibits the issuing or owning of "trust 
certificates," and the placing in the hands of trustees the control of 
any corporation or combination or the manufactured products thereof, 
with the intent to limit or fix the price or lessen the production and 
sale of any article. Sec. 3 provides a -penalty of a fine of $5 to $100 
for each day of violation of this Act. Sec. 4 declares void any 
contract or agreement made in violation of this Act. Sec. 3 declares 
that any purchaser of any article from any individual or corporation 
doing business in violation of this Act shall not be liable for the 
price thereof, and may plead this Act as defense to any suit therefor. 
Sec. 6 provides that any domestic corporation guilty of violating 
this Act shall forfeit its corporate rights and franchises, and any 
foreign corporation so offending shall thereby forfeit its privilege to 
do any business in this state. The illegal act of the agent of a cor- 
poration shall be prima facie the act of the corporation. Sec. Oa 
provides that whenever the rights of a domestic or foreign corpora- 
tion stoall have been thus forfeited, it shall be a felony for any 
person, association of persons or corporation to deal in, sell or offer 
for sale in this state any article made wholly or in part thereby, or 
by the successor or assigns thereof. Penalty: Penitentiary imprison- 
ment not exceeding three years, or jail imprisonment not exceeding one 
year, or fine of $100 to $1,000, or both fine and imprisonment. Sec. 7 
makes it the duty of the Secretary of State to inquire yearly of every 
domestic and foreign corporation doing business in the statp whether 
all or any part of its business is "with any trust, combination or asso- 
ciation of persons or stockholders," as named in the preceding provis- 
ions of this act, and to require an answer under oath under penalty of 
forfeiture of all corporate rights as in Sec. 6 preceding. Sec. 8. When- 
ever it is proven that any domestic corporation has entered into any 
trust, etc., in violation of this Act, it shall be required to £iake the 
affidavit provided for in Sec, 7. and in default thereof the Secretary 
of State shall proceed forthwith to forfeit its corporate rights. Sec- 
tions 9, 10, 11 and 12 fix the duties and compensation of state and 
county officials in enforcement of this Act (circuit and prosecuting 
attorneys receiving one-fourth of penalties collected), and repeal 
Chapter 128, Revised Statutes 1889, entitled "Pools and Trusts." 

[Note. — Under this amended statute a leading test case was 
decided by the State Supreme Court in June, 1899 (State of Missouri 
vs. Firemen's Fund et al.) The law was declared constitutional -and 
seventy-two foreign fire insurance companies were convicted of com- 
bining and conspiring to fix and maintain uniform premium rates. 



286 TRUSTS OR COMPETITION? 

All were forbidden to do further business in the State. This sen- 
tence of expulsion was subsequently changed to a fine of $1,000 each, 
which the companies paid, and they then continued in business in 
Missouri on condition of obeying the statute as thus construed.] 

During the session of 1899 the Legislature of Missouri passed 
five additional Acts against trusts and trade combinations. The 
first, approved April 18, 1899, makes verbal changes in the Act 
of 1897. The second, approved May 10, 1899, is entitled, ''An Act 
to prevent and restrain the continuance and operation of trusts 
and monopolies, and to provide procedure therefor." This is mainly 
devoted to improving the procedure under former statutes. It also 
specifically prohibits all combinations or agreements, the intent or 
effect of which is to control or limit trade or competition by re- 
fusing to sell to or buy from any other persons or concerns, because 
the latter are not members of any trust, association or combination, 
and prohibits all boycotting and threatening of persons for buying 
from or selling to concerns not members of such combines. The 
third, approved May 4, 1899, provides drastic methods for securing 
testimony from officers and employes of trusts. The fourth sup- 
plements the third along the same line. The fifth, approved May 23, 
1899, fixes the status of foreign corporations wishing to do business 
in Missouri. 

Montana.— The anti-trust and anti-monopoly legislation of Mon- 
tana is contained in the Enacted Code of 1895. Section 321 reads: 
"Every person, corporation, stock company or association of persons 
in this state who, directly or indirectly, combine to form what is 
known as a trust, or make any contract with any person or persons, 
corporations or stock companies, foreign or domestic, through their 
stockholders, directors, officers or in any manner whatever for the 
purpose of fixing the price or regulate the production of any article of 
commerce or of the products of the soil for commerce by the people, 
or to create or carry out any restriction in trade to limit the pro- 
duction, or increase or reduce the price of merchandise or com- 
modities, or to prevent competition in merchandise or commodities or 
to fix a standard or figure whereby the price of any article of mer- 
chandise, commerce or produce intended for sale, use or consumption 
will be in any way controlled, or to create a monopoly in the manu- 
facture, sale, transportation of any such article, or to enter into an 
obligation by which they shall bind others or themselves not to 
manufacture, sell or transport any such article below a common 
standard or figure, or by which they agree to keep such article for 
transportation at a fixed or graduated figure, or by which they settle 
the price of such article so as to preclude unrestricted competition, 
is punishable by confinement in the state prison not exceeding five 
years, or by fine not exceeding $10,000, or both. Every corporation 
violating the provision of this section forfeits to the state all its 
property and franchises, and in case of a foreign corporation, it is 
prohibited from carrying on business in the state." Section 325 pro- 
vides that this legislation shall not apply to any arrangement or com- 
bination between laborers made with the object, of lessening the 
number of hours of labor, or increasing wages, nor to persons engaged 
in horticulture or agriculture with a view of increasing the price of 
their products. 



NEBRASKA. 28? 

Nebraska.— [The Nebraska statute now in force repeals the 
previous law (Chapter XCIa, entitled "Trusts," of the Compiled 
Statutes of Nebraska for the year 1895) and was approved April 8, 
1897. Title: "A bill or an Act to define trusts and conspiracies 
against trade and business, declaring the same unlawful and void, and 
providing means for the suppression of the same, and remedies for 
persons injured thereby, and to provide punishment for violations 
of this act, and to repeal," etc. Section 1 of the Act reads: "That 
a trust is a combination of capital, skill or goods by any person or 
persons to fix the price of any article or commodity of trade, use or 
merchandise with the intent to prevent others from conducting or 
carrying on the same business or selling or trafficing with the same 
article, use or merchandise, or a combination of capital, skill or 
goods by two or more persons, or by two or more of them for either, 
any or all of the following purposes: 1. To create or carry out re- 
strictions in trade. 2. To limit or reduce the production or^ increase 
or reduce the price of merchandise or commodities. 3. To prevent 
competition in insurance, either life, fire, accident or of any other 
kind, or in the manufacture, making, constructing, transportation, 
sale or purchase of merchandise, produce or commodities. 4. To fix 
at any standard or figure whereby its price to the public shall be in 
any manner controlled; to establish upon any article of merchandise, 
produce or manufacture of any kind intended for sale, use or com- 
merce in this state; to establish any pretended agency whereby the 
sale of any such article, commodity, merchandise or product shall 
be covered or concealed, or made to appear to be in the original 
vendor for the like purpose or purposes, and to enable the original 
vendor, purchaser or manufacturer to control the wholesale or retail 
price of any such article of merchandise, product or commodity after 
a trust as defined in Section 1 is a conspiracy against trade and 
the title to the same shall have passed from such vendor or manu- 
facturer. 5. To make or enter into, carry on or carry out any con- 
tract, obligation or agreement of any kind or description by which 
they shall bind, or have heretofore bound, themselves not to sell, 
dispose of, traffic in or transport any article of merchandise, com- 
modity or article of trade, product, use, merchandise, consumption or 
commerce below common standard figure, grade or list price, or 
by which they shall agree in any manner to. keep the price of such 
article, product, commodity or transportation at a fixed or graduated 
figure, or price, or by which they shall in any manner establish or 
settle the price of any article of merchandise, commodity or of in- 
surance, fire, life or accident, or transportation between them or 
between themselves and others, or with the intent to preclude, or 
the tendency of which is to prevent or preclude, a free and unre- 
stricted competition among themselves or others, or the people gen- 
erally, in the production, sale, traffic or transportation of any such 
article of merchandise, product or commodity, or conducting a like 
business, or by which they shall agree to pool, combine or unite any 
interest they may have in connection with the sale, production or 
transportation of any such article of merchandise, product or com- 
modity, or the carrying of any such business that its price might in 
any manner be affected thereby." Subsequent sections provide: 



288 TRUSTS OR COMPETITION? 

That all acts creating, or attempting to create, directly or indirectly, 
a trust as denned in Section 1 is a conspiracy against trade ?,nd 
business and unlawful and the penalties usual in anti-trust statutes 
are provided; domestic corporations convicted of violation of the 
act forfeit their charter and franchises, and foreign corporations so 
offending forfeit their right to do business in the state. Prosecutions 
may be brought by any person in the name of the state against 
any person or persons violating any of the provisions of this Act. 

New Mexico.— Approved February 4, 1891. Title: "An Act 
declaring certain trusts, pools and combinations illegal, and providing 
for the punishment thereof." Section 1 reads: "Every contract or 
combination between individuals, associations or corporations having 
for its object,, or which shall operate to restrict trade or commerce, 
or control the quantity, price or exchange of any article of manu- 
facture or product of the soil or mine, is hereby declared to be illegal. 
Every person, whether as individual or agent, or officer, or stock- 
holder of any corporation or association, who shall <*nake any such 
contract, or engage in any such combinations, shall be deemed guilty 
of a misdemeanor, and on conviction thereof shall be punished by a 
fine not exceeding $1,000 nor less than $100, and by imprisonment 
at hard labor not exceeding one year, or until such fine has been 
paid." Subsequent sections provide: That it shall be a mis- 
demeanor to monopolize, or attempt or combine to monopolize, any 
part of the trade or commerce of this territory, the penalty being a 
fine or imprisonment or both. Contracts in contravention of this act 
are void, and purchasers of commodities from persons or concerns 
violating this act are not liable for the payment for the same. 

New York .—Approved May 7, 1897. Title: "An Act to prevent 
monopolies in articles or commodities of common use and to prohibit 
restraints of trade and commerce, providing penalties for violations 
of the provisions of this act, and procedure to enable the Attorney- 
General to secure testimony in relation thereto." Section 1 reads: 
"Every contract, agreement, arrangement or combination whereby 
a monopoly in the manufacture, production or sale in this state of 
any article or commodity of common use is or may be created, 
established or maintained, or whereby competition in this state in the 
supply or price of any such article or commodity is or may be re- 
strained or prevented, or whereby for the purpose of creating, es- 
tablishing or maintaining a monopoly within this state of the manu- 
facture, production or sale of any such article or commodity, the free 
pursuit in this state of any lawful business, trade or occupation is 
or may be restricted or prevented, is hereby declared to be against 
public policy, illegal and void." Section 2 reads: "Every person or 
corporation, or any officer or agent thereof, who shall make or attempt 
to make or enter r:ito any such contract, agreement, arrangement or 
combination, or who within this state shall do any act pursuant 
thereto or in toward or for the consummation thereof, wherever the 
same may have been made, is guilty of a misdemeanor, and on con- 
viction thereof shall, if a natural person, be punished by a fine not 
exceeding $5,000, or by imprisonment not longer than one year, 
or by both such fine and imprisonment, and for a corporation by a 
fine not exceeding $5,000." Subsequent sections of the Act are de- 
voted mainly to procedure thereunder. 



OHIO, NORTH CAROLINA, NORTH DAKOTA. 289 

North Carolina.— Approved March 11,' 1889. Title: "An Act 
to prohibit trusts in the state of North Carolina, and to provide for 
the punishment of persons connected with them." Section 1 
reads: "That all combinations and trusts as defined by this act 
are unlawful, dangerous to the liberty of the people, and are hereby 
forbidden to be formed or carried on in this state." Section- 2 reads: 
"That a trust is an arrangement, understanding or agreement, either 
private or public, entered into by two or more persons or corporations 
for the purpose of increasing or reducing the price of the shares of 
stock of any company or corporation, or of any class of products, 
materials or any manufactured articles beyond the price that would 
be fixed by the natural demand for or the supply of such shares, 
products, materials or manufactured articles, and any attempt to 
carry out such price shall be evidence that such an arrangement, 
understanding or agreement exists." Subsequent sections provide 
the usual penalties and relate to legal procedure in the act. 

North Dakota.— Approved March 9, 1897. Title: "An Act to 
declare unlawful and void all arrangements, contracts, agreements, 
trusts or combinations made with a view to lessen, or which tend to 
lessen, free competition," etc. Section 1 reads: "That all arrange- 
ments, contracts, agreements, trusts or combinations between per- 
sons or corporations made with a view to lessen, or which tend to 
lessen, full and free competition in the importation or sale of articles 
imported into this state, or in the manufacture or sale of articles 
of domestic growfh, or of domestic raw material, and all arrange- 
ments, contracts, agreements, trusts or combinations between per- 
sons or corporations designed, or which tend to advance rates, or 
control the price or the cost to the purchaser or to the consumer of 
any such product or articles, are hereby declared to be against public 
policy, unlawful and void." Subsequent sections provide: That do- 
mestic corporations violating this act shall forfeit their charters and 
franchises, and that foreign corporations so offending shall be pro- 
hibited from doing business within the state. Any violation of the 
act is declared to be "destructive of full and free competition and 
a conspiracy against trade," and the usual penalties are provided 
against individuals. 

Ohio.— Approved April 19, 1898. Title: "An Act to define 
trusts and to provide for criminal, penalties and civil damages and 
punishment of corporations, firms, persons or associations, or persons 
connected with them, and to promote free competition in commerce 
and all classes of business in the state." Section 1 reads: "That a 
trust is a combination of capital, skill or goods by one or more 
persons, firms, partnerships, corporations or associations of persons, 
or of any two or more of them, for either, any or all of the following 
purposes: 1. To create or carry out restrictions in trade or commerce. 
8. To limit or reduce the production or increase, or reduce the rates 
or price of merchandise or any commodity. 3. To prevent competi- 
tion in manufacture, making, transportation, sale or purchase of mer- 
chandise, produce or any commodity. 4. To fix at any standard of 
(o») figure whereby its price to the public or consumer shall be in 
any manner controlled or established, any article or commodity of 

19 



290 TRUSTS OR COMPETlTlONt 

merchandise, produce of commerce intended for sale, use or consump- 
tion in this state. 5. To make or enter into or execute or carry out 
any contracts, obligations or agreements of any kind or description, 
by which they shall bind or have bound themselves not to sell, dis- 
pose of or transport any article or any commodity of trade, use, mer- 
chandise, commerce or consumption below a common standard or 
figure or fixed value, or by which they shall agree in any manner to 
quote the price of such article, commodity or transportation at a fixed 
or graduated figure, or by which they shall in any manner establish or 
settle the price of any article, commodity or transportation between 
them or themselves and others so as to, directly or indirectly, pre- 
clude a free and unrestricted competition among themselves or any 
purchasers or consumers in the sale or transportation of any such 
article or commodity, or by which they shall agree to pool or combine, 
or directly or indirectly unite any interests that they may have 
connected with the sale or transportation of any such article or 
commodity, that its price might in any manner be affected. Every 
such trust as is defined herein is declared to be unlawful, against 
public policy and void." Subsequent sections provide that domestic 
corporations offending against this act shall forfeit their charter 
rights and corporate existence, and foreign corporations so offending 
shall be prohibited from doing business within the state. Every 
violation of any of the provisions of the act is declared to be a con- 
spiracy against trade, and any person convicted of such violation, 
either as principal, manager, director, agent, servant, employer^ or 
any other capacity, is punishable by a fine of $50 to $5,000, or im- 
prisonment from six months to one year, or by both. Each da^y's 
violation of the act constitutes a separate offense. It is made un- 
lawful to issue or to own trust certificates. Civil damage clause. 

Oklahoma.— Approved December 25, 1890. Title: "An Act k> 
prevent combinations in restraint of trade." Section 1 reads: 
"If any individual, firm, partnership or any association of persons 
whatsoever shall create, enter into, become a member of or a party 
to any pool, trust, agreement, combination or understandiDg, with 
any other individual, firm, partnership or association of persons what- 
soever, to regulate or fix the price of, or prevent or restrict the com- 
petition in, the sale of provisions, food, fuel, lumber or other building 
materials, articles of merchandise or other commodity, they shall 
be deemed guilty of a misdemeanor, and upon conviction thereof 
shall be fined not less than $50 nor more than $500." 

South Carolina.— Approved February 25, 1897. Title: "An Act 
to prohibit trusts and combinations, and to provide penalties." 
Section 1 reads: "That from and after the passage of this act all 
arrangements, contracts, agreements, trusts or combinations between 
two or more persons as individuals, firms or corporations made with 
a view to lessen, or which tend to lessen, full and free competition in 
the importation or sale of articles imported into this state, or in 
the manufacture or sale of articles of domestic growth, or of domestic 
raw material, and all arrangements, contracts, agreements, trusts or 
combinations between persons or corporations designed, or which 
tend to advance rates or control the price or the cost to the purchaser 



SOUTH DAKOTA, TENNESSEE, TEXAS. 291 

or to the consumer of any such product or article, are hereby declared 
to be against public policy, unlawful and void." Subsequent sections 
provide the usual penalties against domestic and foreign corporations, 
and against individuals, and for civil damages in case of injury. 

South Dakota.— Approved March 1, 1897. Title: "An Act to en- 
force Section 20 of Article 17 of the Constitution of the state of 
South Dakota." Section 1 reads: "That within the meaning of this 
Act, a trust or a monopoly is a combination of capital, skill or goods 
of two or more persons, firms, corporations or associations of persons: 
First: To create or carry out restrictions in trade. Second: To limit 
the production or to increase or reduce the price of commodities. 
Third: Of preventing competition in the manufacture, competition, 
sale or purchase of commodities. Fourth: To fix any standard or 
figure whereby the price to the public shall be in any manner estab- 
lished or controlled, provided that nothing in this act shall be con- 
strued so as to include labor organizations." Subsequent sections 
provide the usual penalties against domestic and foreign corporations, 
and against individuals who shall violate any provisions of the act. 

Tennessee.— Original statute approved April 6, ;, *ilN9. Title of 
amended act (March 30, 1891): "An Act to declare unlawful all 
trusts, pools, contracts, arrangements and combinations in the 
restraint of trade, production, manufacture or sale to fix the 
liability of and punish persons, firms and corporations concerned 
therein." Section 1 reads: "That all trusts, pools, contracts, ar- 
rangements or combinations now existing, or hereafter made with a 
view, or which tend to prevent full and free competition in the produc- 
tion, manufacture and sale of any article of domestic growth, pro- 
duction or manufacture, or in the importation and sale of any article 
of domestic growth, production or manufacture, or in the importa- 
tion and sale of any article grown, produced or manufactured in any 
other state or country, or which are designed, or tend to fix, regu- 
late, limit or reduce the price of any article of growth, production or 
manufacture, or which are designed, or tend in any way to create 
a monopoly, are hereby declared to be unlawful, against public policy 
and void." The act provides the usual penalties of fine and imprison- 
ment for individuals, the forfeiture of charter and corporate existence 
for domestic corporations, and exclusion from the state for foreign 
corporations violating the act. 

Texas.— Approved May 25. 1899. Title: An Act to prohibit 
pools, trusts, monopolies and conspiracies to control business and 
prices of articles; to prevent the formation or operation of pools, 
trusts, monopolies and combinations of charters of corporations that 
violate the terms of this act, and to authorize the institution of 
prosecutions and suits therefor. 

Provisions: Section 1. Any corporation organized under the 
laws of this or any other state or country, and transacting, or con- 
ducting any kind of business in this state, or any partnership, or 
individual, or other association of persons whatsoever, who shall 
create, enter into, become a member of or a party to any pool, 
trust, agreement, combination, confederation or understanding with 



M TRUSTS OR COMPETlflONf 

any other corporation, partnership, individual or any other person 
or association of persons, to regulate or fix the price of any article 
of manufacture, mechanism, merchandise, commodity, convenience, 
repair, any product of mining, or any article or thing whatsoever, 
or the price or premium to be paid for insuring property against 
loss .or damage by fire, lightning or storm, or to maintain said 
price when so regulated or fixed, or shall enter into, become a mem- 
ber of or a party to any pool, agreement, combination, contract, as- 
sociation or confederation to fix or limit the amount or quantity 
of any article of manufacture, mechanism, merchandise, commodity, 
convenience, repair, any product of mining, or any article or thing 
whatsoever, or the price or premium to be paid for insuring property 
against loss or damage by fire, lightning, storm, cyclone, tornado, 
or any other kind of policy issued by any corporation, partnership, 
individual, or association of persons aforesaid, shall be deemed and 
adjudged guilty of a conspiracy to defraud, and to be subject to 
the penalties as provided by this act. 

Sec. 2. Defines monopoly to be any union or combination of 
capital, credit, property, assets, trade or custom, skill or acts, or of 
any other valuable thing, whereby any one or more of the things 
prohibited by rfiis Act are accomplished or sought to be accomplished, 
or which tend to produce results herein prohibited; and all monopoly 
is pronounced contrary to public policy and prohibited under severe 
penalty. 

The Act further prohibits manufacturers in Texas of any article 
from raw materials produced within the state from selling at less 
than cost or giving away such articles for the purpose of driving 
out or financially injuring competitors. It prohibits the formation of 
any pool or arrangement to control prices or limit competition, or 
the boycotting of any competitor because he does not join such 
combination. It forbids any new association to withhold its news 
from any publisher desiring the same because he is not a member 
of such association; requires every owner of a patent for any 
process for preparing for market any raw material produced in 
Texas to place the same or rights thereunder upon the market so 
that no monopoly under the same shall exist. It prohibits the 
sale, delivery or disposition in the state of any articles manufactured 
within the state or elsewhere in violation of this Act, and the pur- 
chaser of any such articles shall not be required to pay for the same 
if so purchased. Severe penalties attach to the violation of the 
Act, both fines and imprisonment. 

Utah.— Approved March 9, 1896. Title': "An Act prohibiting 
and providing for the punishment of persons, copartnerships, as- 
sociations and corporations forming pools, trusts, combinations or 
conspiracies," etc. Section 1 reads: "Any combination by persons 
having for its object or effect the controlling of the prices of any pro- 
fessional services, any products of the soil or of any article of manu- 
facture or commerce, or the cost of, exchange or transportation, is 
prohibited and will be declared unlawful. Any person who shall 
violate the foregoing provisions shall be subject to prosecution and 
punishment as hereinafter provided." The act provides against cor- 



WASHINGTON, WISCONSIN, C AX AD A. 293 

porations and individuals violating its provisions the penalties usual 
in anti-trust statutes. 

Washington.— Section 22 of Article XII of the Constitution of the 
State of Washington provides that "monopolies and trusts shall never 
be allowed in this state, and that no incorporated company, copart- 
nership or association of persons in this state shall, directly or in- 
directly, combine or make any contract with any other incorporated 
company, foreign or domestic, through their stockholders or the trustee 
or assignees of such stockholders, or with any copartnership or as- 
sociation of persons, or in any manner whatever for the purpose of 
fixing the price or limiting the production, or regulating the transporta- 
tion of any product or commodities. "The Legislature is required to 
pass laws for the enforcement of this section. The only anti-trusc 
legislation adopted by the legislature of Washington was approved 
March 21, 1895. Title: "An Act to Regulate the Sale of Farm, 
Dairy, Orchard or Garden Produce on Commission." The entire Act 
reads as follows: "It shall be unlawful for persons engaged in the 
business, or commission merchants, to enter into any combination, 
conspiracy or pool for the purpose of artificially raising or depressing 
the market prices of any farm, dairy, orchard or garden produce, or to 
exclude from the market the produce of any particular locality grown 
or manufactured for any person." 

Wisconsin.— Approved April 27, 1897. Title: "An Act to Pre- 
vent Corporations Organized Under the Laws of this State, From 
Entering Into Any Combination, Conspiracy, Trust, Agreement or 
Contract Intended to Operate in Restraint of Any Lawful Trade or 
Commerce Carried On In this State." Section 1 reads: "Corpora- 
tions organized under the laws of this state are prohibited from enter- 
ing into any combination, conspiracy, trust, pool, agreement or con- 
tract intended to restrain or prevent competition in the supply or 
price of any article or commodity in general use in this state, or con- 
stituting a subject of trade or commerce therein, or to control the 
price of any such article or commodity, or regulate or fix the price 
thereof; to regulate or limit the amount or quantity thereof to 
be manufactured, mined, produced or sold in this state, or to fix any 
standard or figure by which its price to the public shall be in any 
manner controlled or established." The usual procedure and penalties 
follow. 

ANTI-TRUST LAW OF CANADA. 

In 1892 the Dominion Parliament enacted Section 520 of the 
Criminal Code as follows: 

"520. Every one is guilty of an indictable offense and liable 
to a penalty not exceeding four thousand dollars and not less than 
two hundred dollars, or to two years' imprisonment, and if a cor- 
poration, is liable to a penalty not exceeding ten thousand dollars 
and not less than one thousand dollars, who conspires, combines* 
agrees or arranges with any other person, or with any railway, 
Steamship, steamboat or transportation company, unlawfully— 

(a) to [unduly] limit the facilities for transporting, producing, 



294 TRUSTS OR COMPETITION? 

manufacturing, supplying, storing or dealing in any article or com- 
modity which may be a subject of trade or commerce; or 

(b) to restrain or injure trade or commerce in relation to any 
such article or commodity; or 

(c) to [unduly] prevent, limit, or lessen the manufacture or 
production of any such article or commodity, or to [unreasonably] 
enhance the price thereof; or 

(d) to [unduly] prevent or lessen competition in the production, 
manufacture, purchase, barter, sale, transportation or supply of 
any such article or commodity, or in the price of insurance upon 
person or property. 

On August 11, 1899, the Parliament passed a significant amend- 
ment by striking out the word "unduly" in paragraphs (a), (c) and 
(d), and by striking out the word "unreasonably" in paragraph (c), as 
marked in brackets above. 



ATTITUDE OF LABOR LEADERS. 

The attitude of the leaders of organized labor in the United 
States toward the monopoly trust system at the beginning of the 
year 1900 may be thus summarized: They advise no crusade against 
trusts, first because they apprehend that anti-trust measures may, on 
occasion, be used against the labor unions themselves; and, second, 
because in their judgment the trust movement is, with sufficient 
rapidity and with entire certainty, leading up to that form of socialism 
which consists in government ownership and management of all great 
industries — see the resolutions adopted at the annual meeting of the 
American Federation of Labor held in Detroit in December, 1899. 
The obvious comment on such an attitude is this: 1. Anti-trust 
statutes, or laws against conspiracy and monopoly, can only be in- 
voked against abuses of the right of combination among workingmen— 
as in the case of the Debs riot in 1894, which by destructive violence 
obstructed interstate commerce and the United States mails. Good 
citizens, whether wage-earners or otherwise, approve of suppressing 
riot, preserving order and protecting property and life. Organized la- 
bor, acting within the lines of good citizenship, has nothing to fear 
from anti-trust legislation. That battle has been fought and won, 
and the great body of workingmen evidently take this view. 2. If it 
is true that the trust movement is leading up to socialism the mass of 
workingmen, in common with the people generally, will see in this 
fact a reason for opposing, not acquiescing in, that movement. 
Whatever the leaders may think, the rank and file of wage-earners 
in the United States have not been bitten by the socialistic flea. 



CHAPTER XI. 
LIST OF LEADING AMERICAN TRUSTS. 



The 130 principal trusts and consolidations in the United States, each 
capitalized at $10,000,000 or more, embraced in the subjoined list, repre- 
sent an aggregate capital in stock and bonds as follows: 

Common stock $2,784,218,000 

Preferred stock 1,141,643,000 

Bonds 88,288,000 



$4,014,149,000 



Estimated combined capital (stock and bonds) of general cor- 
porate trusts in the United States of less than $10,000,000 
each 600,000,000 

Estimated capital (stock and bonds) of local corporate trusts 
in the United States, each having a virtual monopoly in its 
own field, not including tramway or transportation com- 
panies, syndicates, "combines" or other trade agreements. . 385,851,003 



Approximate grand total $5,000,000,000 



Any list of American trusts is necessarily incomplete very soon 
after its date, since new ones are constantly forming, but inasmuch 
as most leading manufacturing industries in this country have 
now been merged in trusts, subsequent additions are likely to be 
relatively unimportant. The following list has been compiled at 
the close of 1899, from all accessible sources of information. Special 
acknowledgments are due to Mr. Byron W. Holt, whose compilation 
published in the Review of Reviews and in the Commercial Year 
Book for 1899 were very full at the date of their publication; to the 
editors of the New York Commercial and Financial Chronicle, and 

295 



296 TRUSTS OR COMPETITION? 

to Mr. Charles R. Flint of New York, who has courteously fur- 
nished the editor all the data gathered by his own house. 

The present conservative exhibit is intended simply to give in- 
formation as to the number and character of leading American in- 
dustries which have been practically unified under a single owner- 
ship, and the amount for which each consolidation is capitalized in 
stock and bonds combined. Wherever the facts have been obtain- 
able only the amount of securities actually issued is given herein. 
The aim has been to include only such industrial undertakings 
as involve the combination of two or more concerns, and for the 
most part each organization named is a typical trust, which means 
a single corporation that has purchased the plants and businesses 
of all or a great majority of competing concerns in the same line 
in the country so as to control the industry and enjoy . a virtual 
monopoly thereof. Obviously, in this sense, such corporations as 
the Federal Steel and Republic -Steel are not strictly trusts, for un- 
til they themselves consolidate they are in substantial competition. 
Only those general trusts are embraced in the list which have a 
capitalization of ten million dollars or more. The lesser ones, 
usually consolidating small industries, are very numerous, and in 
the aggregate represent a large volume of capital. 

Dividing trusts into local and general, the former have been 
omitted in the interest of brevity and clearness, and only the latter 
included. As an example of what is meant by local trusts, of 
which a very large number exist, the Maryland Brewing Company, 
with a capital of $13,800,000, has purchased and now operates 
plants representing six-sevenths of the brewing capacity of Balti- 
more and vicinity, and aims to absorb the remainder. Industries 
like this, which are necessarily local and limited in character, seem 
to be quite as much the subject of monopolization as are those of 
national scope. In a few instances, organizations are listed which 
are incomplete, and some of these may fail of consummation be- 
cause of the greater caution manifested by banks and investors 
and the comparative disfavor into which many trust securities have 
already fallen. 

With two or three exceptions, by way of example, no mention 
is made of those innumerable trade agreements or understandings 
which exist throughout the country among independent and com- 
peting concerns for the purpose of somewhat regulating competition, 
such as associations of wholesale dealers, express companies and 
other common carriers, insurance corporations, retailers in cer* 



LIST OF LEADING TRUSTS. 297 

tain lines and some manufacturing interests. Such voluntary asso- 
ciations for mutual protection against destructive forms of business 
rivalry seldom fix and could not long maintain exorbitant 
prices, and otherwise they have little in common with the typical 
monopoly trusts. Most exhibits of trust organizations hitherto 
published have included the largest of these loose trade associa- 
tions, giving approximate estimates of capital involved, thus abnor- 
mally swelling the aggregate of capital purporting to be represented 
by the trust movement. This ill-advised practice has resulted in 
the widely published estimate of eight thousand million dollars as 
the total capitalization of trusts — a great exaggeration. With few 
exceptions we have also omitted all those legitimate "industrials" 
which are simply great independent corporations engaged in large- 
scale production, but having and seeking no monopoly advantage, 
like Carnegie's and the Baldwin Locomotive Works. The capital 
of each organization, as given herein, includes common stock, pre- 
ferred stock and bonds. Of the one hundred and thirty concerns 
listed only nineteen have, so far as known, issued bonds. ,Of the total 
capitalization named herein it is a reasonable estimate that 60 
per cent, is "water." Ninety-five per cent, of the trusts here named 
were organized in New Jersey, although not more than five per 
cent, of them have plants, or offices other than technical, in that 
state. 

CAPITAL. 

Amalgamated Copper Company $75,000,000 

American Agricultural Chemical Company (23 fertilizer plants).. 40,000,000 

American Alkali Company 30,000,000 

American Beet Sugar Company 19,000,000 

American Bicycle Company . 40,000,000 

American Car and Foundry Company (railroad cars) 55,000,000 

American Cotton Oil Company (123 properties) 33,600,000 

American Electric Heating Corporation 10,500,000 

American Fisheries Company (Menhaden oil, 18 companies) 10,000,000 

American Window Glass Company (majority in the U. S.) 30,000,000 

American Gas and Electric Lighting Fixture Company 15,000,000 

American Hide and Leather Company . 60,000,000 

American Ice Company (to control output of Maine). ... .^ 60,000,000 

American Linseed Oil Company (82 plants, 85 per cent in country). 28,500,000 

American (Sewing) Machine Company 10,000,000 

American Malting Company (30 companies; nearly all in the U. S.) 29,000,000 

American School Furniture Company 11,500,000 

American Ship Building Company 30,000,000 

American Silk Manufacturing Company (silk thread) 12,500,000 

American Smelting and Refining Company 54,000,000 

American Spirits Manufacturing Company (whisky; 18 districts). 37,000,000 
American Steel and Wire Company (controls wire industry, etc., 

in the U, S.) ........... ... .. 90,000,000 



238 TRUSTS OR COMPETITION? 

CAPITAL. 

American Steel Hoop Company $33,000,000 

American Sugar Refining Company 74,000,000 

American Thread Company (13 cotton thread companies) 18,000,000 

American Tin Plate Company (290 mills, practically all in XL S.). 50,000,000 

American Tobacco Company (plug business sold in 1898) 51,000,000 

American Woolen Company (men's woolens, mills in New Eng- 
land) 65,000,000 

American Writing Paper Company 42,000,000 

American Bridge Company (incomplete) 65,000,000 

American Chicle Company (chewing gum trust) 10,000,000 

American Grass Twine Company 15,000,000 

American Iron and Steel Company ' 25,000,000 

American Plumbing Supply Company 35,000,000 

American Pneumatic Service 15,000,000 

American Radiator Company 10,000,000 

American Railway Equipment Company 22,000,000 

American Switch Company 11,000,000 

American Thresher Company (forming to control 70 per cent of 

plants in the D. S.) 60,000,000 

American Vinegar Company « 11,000,000 

American Watch Machine Company 12,000,000 

American Window Glass Company 17,000,000 

Asphalt Company of America 30,000,000 

Atlantic Snuff Company (all but two companies in U. S.) 10,000,000 

Bessemer Ore Association 20,000,000 

Borden Condensed Milk Company ". 20,000,000 

California Wine Makers' Corporation (allied with California Wine 

Association) 10,000,000 

Central Lumber Company of California 70,000,000 

Chemical Association (combination of pharmaceutical manufac- 
tories) 50,000,000 

Columbian and Electric Car Lighting and Brake Company 10,000,000 

Consolidated Ice Company (12 companies in New York, Philadel- 
phia and Maine) 11,250,000 

Consolidated Rubber Tire Company 10,000,000 

Consolidated Street Car Company 18,000,000 

Continental Cement Company 10,000,000 

Continental Tobacco Company (7 plug companies and plug in- 
terests of American Company) 92,000,000 

Diamond Match Company 11,000,000 

Distilling Company of America 125,000,030 

Dominion Iron and Steel Company 20,000,000 

Electric Boat Company 10,000,000 

Electric Storage Battery Company (absorbed competitors in 1895). 18,500,000 

Edison Portland Cement Company 11,000,000 

Federal Carriage Company 20,000,000 

Federal Printing Ink Company 20,000,000 

Glucose Refinery Company 40,000,000 

Indo-Egyptian Compress Company 15,000,000 

International Cement Company 50,000,000 

International Paper Company (25 news print paper manufactur- 
ers east of Chicago) 49,000,000 

International Car Wheel Company 15,000,000 

International Pump Company 27,500,000 

International Silver Company (24 companies; 75 per cent of silver 

plate in U. S.) , 19,000,000 



LIST OF LEADING TRUSTS. 299 

CAPITAL. 

International Smokeless Powder and Dynamite Company $10,000,000 

Kern Incandescent Light Company 12,000,000 

Lake Superior Consolidated Iron Mines 28,752,000 

Marsden Company of Philadelphia (cellulose trust) 32,000,000 

Mt. Vernon Woodbury Cotton Duck Company 23,500,000 

National Biscuit Company (90 per cent of large bakeries in the 

U. S.) 54,000,000 

National Carbon Company (all companies in the U. S. and three- 
fourths in the world) 10,000,000 

National Carpet Company (not completed) 50,000,000 

National Enameling and Stamping Company (consolidating four 

principal companies in the U. S.) 30,000,000 

National Lead Compary (26 plants for white lead, etc.) 30,000,000 

National Car Equipment Company 10,000,000 

National Electric Company .25,000,000 

National Glass Company 20,000,000 

National Tin Plate and Stamping Ware Company 20,000,000 

National Salt Company (95 per cent in the U. S.) 12,000,000 

National Screw Company 10,000,000 

National Starch Manufacturing Company (20 plants; price agree- 
ment with other companies) 11,000,000 

National Steel Company 58,000,000 

National Tube Company (absorbs 17 corporations) . 65,000,000 

National Wall Paper Company (forming by absorption of 30 com- 
panies or more) 35,500,000 

New England Cotton Yarn Company 19,000,000 

New England Electric Vehicle and Transportation Company 25,000,000 

New York Electric Vehicle Company 25,000,000 

Otis (passenger) Elevator Company (13 companies; 85 per cent 

product in the U. S.) 10,000,000 

Planters' Compress Company 15,000,000 

Pittsburg Plate Glass Company 10,000,000 

Pressed Steel Car Company 25,000,000 

Print Cloth Pool (30 mills; restricts production and fixes prices) 50,000,000 

Reading Company (anthracite coal trust) 150,000,000 

River Coal Operators' Company (Pittsburg to New Orleans) 11,000,000 

Royal Baking Powder Company (consolidation of all companies). . 20,000,500 
Rubber Goods Manufacturers' Company (consolidation of me- 
chanical goods companies) 50,000,000 

Standard Distilling and Distributing Company (whisky). .- 24,000,000 

Standard Oil Company (owns 83 per cent U. S. refineries, etc.) 110,000,000 

Sloss, Sheffield S. and I. Company 20,000,000 

Standard Rope and Twine Company (sells through Union Selling 

Company) 22,400,000 

Steel Beams Association (fixes prices) 20,000,000 

Steel Rail Manufacturing Association (agreement; all large com- 
panies) 50,000,000 

Swift & Co. (beef) 17,500,000 

Tennessee Coal, Iron and Railroad Company (plants in Tennes- 
see and Alabama) 30,700,000 

Union Bag and Paper Company 27,000,000 

Union Steel and Chain Company 60,000,000 

Union Tobacco Company 19,000,000 

Union Typewriter Company (five leading corporations) 18,000,000 

United Fruit Company 20,000,000 



300 TRUSTS OR COMPETITION? 

CAPITAL. 

United Lighting and Heating Company (eight companies; oil 

lighting interests in the U. S.) $12,000,000 

United Shoe Machinery Company 17,000,000 

United States Cast Iron Pipe and Foundry Company (13 com- 
panies; practically total capacity in the U. S.) 30,000,000 

United States Dye Wood and Extracts Company (uniting all in m 

the U. S.) < 10,000,000 

United States Envelope Company ...10,000,000 

United States Flour Milling Company 50,000,000 

United States Glue Company 40,000,GOO 

United States Leather Company 70,000,000 

United States Rubber Company (controls boot and shoe output of 

the U. S.) 52,000,000 

United States Varnish Company (practically whole capacity in 

the U. S.) ♦ 36,000,000 

United States Vehicle Company .25,000,000 

United States Worsted Company 9 70,000,000 

Union Match Company 10,000,000 

Westinghouse Electric and Manufacturing Company (owns the 
U. S. Electric Locomotive Company and Water Company, and 
pools with General Electric) 16,000,000 



Incidental confirmation of Mr. Percy Sanderson's statement herein 
concerning trusts in Great Britain is furnished in a press cablegram from 
London, showing that only at the close of 1899 is the real trust movement 
reaching England from New York, and that the success of the movement 
there depends upon the stability of the American trusts, after which 
the British organizations are patterned. The following appeared in the 
Chicago Tribune of December 28, 1899, as a "special cable to the Chicago 
Tribune by Arthur L. Clarke," and under the heading "New Trusts in 
England:" 

• "London, Dec. 27.— The December break in industrials on Wall street 
was not particularly welcome to London operators. The trust idea is just 
beginning to take root in England. Already several big combinations 
in the cotton industry have been floated, the latest with a capital of 
$75,000,000. Others equally big are hatching. Any collapse in American 
industrials is, therefore, a matter of grave concern to English promoters, 
who base their prospective profits un American precedents. The result 
will possibly lead to freer dealings in industrials, placing these among 
the international list, the only difficulty probably being in getting the 
American trust stocks listed on the London Stock Exchange, but in its 
present temper even this is hardly an insuperable obstacle." 



INDEX 



CHAPTER I. 
THE ARGUMENT FOR THE TRUST. (Editorial.) 

Free Competition a Failure, 15— Waste Through Competition, 17— Natural Evo- 
lution of the Trust, 18— Economies of Large-Scale Production, 19— Advantages to 
Wage-Earners, 20— Better Relations Between Labor and Capital, 21— Benefit to the 
Public, 22— Banishment, of W T ar Methods; A Needed Industrial Balance-Wheel, 23— 
Production Adjusted to Consumption, 24— Lower Prices and Better Goods, 25— 
Enlargement of Our Foreign Trade, 26— Improved Access by the People to Indus- 
trial Investments, 27— Advantage to Outgoing Manufacturers, 28 — Some Criticisms 
Answered; Displacement of Former Employees, 28— No Diminution in Aggregate 
Production or in Labor Required, 29— Status of Workingmen Not Impaired, 29— 
Traveling Salesmen, 30— Trusts Not Monopolies, 31— "Potential" or Possible Com- 
petition a Sufficient Restraint Upon Trusts, 32— Alleged Evils of Overcapitalization 
33— An Accomplished Revolution, and Legally Indestructible. 

A Further Favorable View (by Dr. Albert Shaw, editor of the Review of 
Reviews), 36-42: The Combination of Capital; Railroad Amalgamation, 36— Advan- 
tages of United Management; Public Welfare Not Menaced, 37— Socialism or Public 
Ownership of Industries a Subsequent Issue, 38 — Transitional Distuibances; the 
Rights of Monopoly, 39— Freedom of Combination, with Regulation; Magnitude of 
Monopoly Movement, 40— Cohesive Power of the Trusts; Great Fortunes and 
the Trusts, 41. 

CHAPTER II. 

THE ARGUMENT AGAINST THE TRUST. (Editorial.) 

Explanatory; No War on Capital and Corporations, 43-46— Competition the 
Schoolmaster of the Race and Not a Failure, 47— Causes and Genesis of the Trust; 
the Tru&t an Economic Impertinence, 49— Germ of the Trust Idea, 50— The Standard 
Oil and the Sugar Trust as Inciting Examples; .Method of Trust Building, 52 -Plants 
Overvalued; Capital Inflated, 54— Expert Testimony, 55 -The Men Behind the 
Trust, 57— Trusts the Result of Monopoly-Hunger, Not of Natural Evolution, 58— 
Logic of the Deadly Parallel Column, 59— Trusts Make Economy of Production a 
Pretext for Monopoly; Do Trusts Exist in Europe? A Negative Answer with 
Proofs, 60— Some Trust Benefits Fictitious; Others Overstated, 62— Little 
Economic Advantage in Mere Unified Ownership of Scattered Factories, 63— Benefits 

301 



302 INDEX. 

of Large-Scale Production Stop Short of Monopoly, 63— Cost of Marketing Product, 
64— Trusts Not Necessary to Enlargement of Our Foreign Trade, with Proofs, 65— 
The Ethical Side, 66— Effect of Trusts on Towns and the Smaller Cities, 67— Concen- 
tration and Eastward Movement of Factories, 69— Trusts and the Farmer, the New 
Sectionalism, 70— Trusts and the Workingman 72— The Closed Door of Opportunity 
for Young Men, 75— Competition, Actual, Potential and Spurious, 78— The Giant and 
His Club; an Economic Parable, 80— Fictitious and Tolerated Competitors, 81— A 
System of Universal Private Monopoly Invoked, 82— Specimens of Monopolistic 
Vermin, 83— Monopoly-Trusts and Socialism, 84— As to Monopoly Prices, Present 
and Future, 85-88— Appendix: Concerning Trusts in Europe, Continued, 90-94— 
Latinizing American Character, 94— The Central Wrong of Overcapitalization, 95— 
Trusts vs. "Large Corporations," 96— A Trust Defined, 97. 



CHAPTER III. 
THE COLLEGE AND THE TRUST. 

Views of Some Professors of Political Economy: Cornell University, Prof. Jenks: 
General Statement of Questions Raised by the Trust Movements, 99— Effects on 
Middlemen; Legislation, 103. Yale University, Pres. Hadley : Formation and Con- 
trol of Trusts, 104— Railway Pools, 105— Futility of Most Legal Prohibitions, 106— 
Monopolies Usually Shortsighted and Greedy, 108— Methods for Regulating Monop- 
olies, 110. Columbia University, Prof. Clark: The Problem Outlined; Large Cap- 
ital, Centralized Production and Monopoly Often Confounded in the Public Mind, 
112— Can Monopoly be Expelled from the Trust? 113— Discrimination in Selling 
Prices, the Chief Weapon of the Trusts Against Competitors, 115. University of 
Michigan, Prof. Adams: Natural and Arbitrary Monopolies, 117— A Point Beyond 
Which It Is Unprofitable to Enlarge Manufacturing Plants, 118— Social and Political 
Results of Trusts, 118— Origin and Causes; Legislation, Federal and State Control, 
119. Williams College, Prof. Bullock: Artificial Stimulus to Trust Formation- 
Limitation of Large-Scale Economies— Permanence of Monopoly Uncertain— Com- 
petition in Some Form an Indestructible Principle, 120-121. Institute of Social 
Economics, Prof. Gunton: Industrial Evolution— Advantages' of Large Plants and 
Corresponding Capitalization— Monopoly Element in Trust System Denied or Ignored 
—Editorial Comment, 122-126. Oberlin College, Prof. Carver: Trust System Not a 
New Thing -A Natural Adjustment of Supply to Consumption, 128. Dartmouth 
College, Prof, Dixon: Nature of the Trust— Its Place in Modern Economic Develop- 
ment— Should Interference be Regulative or Destructive? 128. University of Chi- 
cago, Prof. Brooks: Early History of the Trust System— Its Yet Undeveloped Char- 
acter—Ultimate Results Unknown— A Result of Economic Advance— State Control 
Will Follow Its Abuse of Privilege, 129-131. Bureau of Economic Research, Prof 
Bemis: Competitive Methods Often Destructive— Charges Against the Trusts— Peril 
to Political Purity and Personal Liberty— Remedies Suggested, 132-134. University 
of Wisconsin. Prof. Ely: Summary of His Forthcoming Book Entitled. "Monopolies 
and Trusts," 134-137— Mr. Rockefeller's Suggestions, With Editorial Comment, 138. 



INDEX. 303 

CHAPTER IV. 
THE CHICAGO CONFERENCE ON TRUSTS. 

Editorial Comment, 139— Address by Hon. W.J. Bryan: All Private Monopoly 
Indefensible and Intolerable, 143— Evident Purposes of the Trust, 144— Brains Need 
Not Apply, 145— Some Causes of Trusts, 146— Seductive Provisions of New Jersey 
and Delaware Corporation Laws, 147— Certain Remedies' Suggested, 148— Form of 
Federal Action, 149— Monopoly Breeds Aristocracy, 153— The Farmer and the Trust, 
154— Hon. W. Dudley Foulke, 155-157— Hon. Bourke Cockran, 158— Gov. Pingree of 
Michigan, 158— T. B. Walker, 159— Atty. Gen. Crow and Gov. Atkinson, 160. 

CHAPTER V. ■ 
THE QUESTION OF REMEDIES. (Editorial.) 

Are any Remedies Needed?— If so, Shall They Cure by Regulation or Removal- 
Concerning Regulation and Palliation— Impracticability of Most Proposed Remedies 
—Twenty-one Suggestions from Eminent Sources— Analysis of the Leading Ones- 
Plans of Messrs. Bryan and Cockran— Concerning Remedy by Trust Disintegration 
—Extirpation Less Difficult than Regulation— Does the Common Law Permit any 
Refuge for Private Monopoly?— Negative Answer by the Courts thus Far— State and 
Federal Judiciary Likely to Furnish an Early and Satisfactory Solution of Trust 
Problem, 161-174. 

CHAPTER VI. 
THE COURTS AND THE TRUSTS. 

A Notable Judicial Decision, 175— The Addyston Pipe Company Case, 179— 
Status of the Trusts Under Federal Laws, 181— Attitude and- Temper of the U. S. 
Supreme Court Toward Monopoly Trusts, 184— The Illinois Glucose Case, 186— 
"Concert Without Compact" Judicially Approved, 190— Supreme Court of Michi- 
gan on Monopolies, 192— Labor Combinations and the Courts, 193. 

CHAPTER VII. 
THE STANDARD OIL TRUST. 

Historical Sketch and Defense by Its Attorney— Origin and Development— Pur- 
poses of Its Founders— Methods Pursued and Results Accomplished— As to Discrim- 
inating Railroad Rates— Treatment of Competitors— Improvement and Cheapening 
of Product— Why the Standard Trust is Criticised— Editorial Comment; The Mari- 
etta Transportation Episode; A 300 Per Cent Advantage; Some Conclusions, 194- 
207. 



§04 XtfDEX. 

CHAPTER VIII. 
LEGAL STATUS OF THE TRUST SYSTEM. 

The Law and the Trust (Editorial): Newness of Trust Legislation and Court 
Decisions— Attitude of American Law Toward Monopoly — Genesis of our Anti-Trust 
Statutes— Reasons for Their Extreme Provisions— Combination to Compete versus 
Combination to Monopolize, 208-213— Trusts Under the Federal Constitution by John 
T. Dye of the Indianapolis Bar: The Extent and Limits of Legislative Control over 
Freedom of Contract— The Case Stated— Power of Congress in the Premises— Power 
of State Legislatures— Sacredness of Private Property— Inalienable Right of Every 
Citizen to do What he Will with his Own— One Corporation may Lawfully Purchase 
the Assets and Business of all Others— The Resulting Suppression of Competition, 
No Bar to the Transaction— The Modern Monopoly Trust Legally Unassailable, 214- 
229— Judge Cooley on the Common Law, Its Origin and Nature, 230— The Mogul 
Steamship Case, 231— Mr. Beach on the Future of the Trust. 234— Views of Presidents 
Harrison, Cleveland and McKinley, 234-236. 

CHAPTER DC. 
TRUST MISCELLANY. 

The Trust in Politics (Editorial), 238-240— The Tariff and the Trust (Editorial). 
241— The Department Store: Objections to It Stated and Answered— Views of Hon 
John Wanamaker, 243-246— Trusts and Organized Labor: Views of President 
Gompers, of American Federation of Labor, and of General Secretary White, of the 
United Garment Workers of America, 247-249— The Flour Milling Industry, Views 
of Ex-Gov. Pillsbury, 250— A Voice from New England, Senator W. E. Chandler, 
251-254— The St. Louis Anti-Trust Conference of Governors, 254— Comment by 
Gov. Sayers, of Texas— Some Special Trade Combinations in England Explained by 
Their Organizer, E. J. Smith, 258— Some Criticisms Thereon, 260— The Populist 
Position, as Stated by Senator Marion Butler, 261— Gov. Theodore Roosevelt, 263— 
Bank Sentiment, 264— Pres. Havemeyer of the Sugar Trust, 265— A Chapter of Pos- 
sible History (A. D. 1925): A Backward Glance— Rise and Decline of the Trust 
System— Vision of an Optimistic Pessimist— A Taste of Socialism— An Untimely 
Interruption— All's well that ends well, 266-273. 

CHAPTER X. 
ANTI-TRUST LEGISLATION. 

Synopses of All Existing Statutes Against Trusts and Other Monopolies Enacted 
by Congress, by Twenty-nine State Legislatures and by the Canadian Parliament, 
274-294— Attitude of Labor Leaders, 294. 

CHAPTER XI. 

List of Leading American Trusts with Scope and Capitalization, 295-300. 



